The Ethical-Legal Dilemmas of Sales

Scott Farrell Comments:

As we all know, there is often a big difference between what is “legal” and what is “ethical.” Unscrupulous sales professionals often prowl that gray zone in order to meet quotas, lure clients and make profits. In the second part of this article, we see that a salesperson can’t resort to mere legality if he or she wants to win (or maintain) the trust of his or her clients.

sale-dealNow, with all this in proper perspective, let’s look more closely at the issue of sales ethics. An accepted definition of ethics is: The science of moral duty or the science of ideal human character. Therefore, ethics are moral principles or practices. That’s why NASP refers to them as standards of professional conduct. When someone acts in an ethical fashion it means they are conforming to some standard of moral behavior.

Here in the U.S. our body of laws has been used in an attempt to standardize a common code of conduct among all members of society. And while there is a mass of laws at the local, state, and federal level that covers lots of aspects of our business and personal lives, most people know that these laws can’t control everything.

Therefore, most citizens operate their daily lives under a personal code of ethics which dictates things that they will or will not do. For example, take a salesperson who desperately needs a certain order to make quota for the year and tells this to the prospect who wants to delay the order until after the first of the year. The fact here is that while it would be legal to share the information about how bad the rep needs the order, it would be viewed as unethical to do so.

This brings up the concept of the legal-ethical dilemma. Those previously mentioned rules, regulations and laws clearly define activities that are not legal. At this time it would be helpful to briefly review several of the more landmark ones.

First is the Clayton Antitrust Act (link no longer available) along with its associated Robinson-Patman Amendment. These represent federal laws that restrict such things as price discrimination where unfair discounts are given to some buyers but not others. In the world of sales, it is a very common situation where a buyer will request “special” or preferential pricing as a condition to placing an order. Or, a buyer will insist on some form of long-term price guarantee that is not offered to others. In each of these cases, it is illegal to do so. However, firms and their respective sales staff often grant these concessions in the effort to secure orders. While there are technical ways to circumvent getting into trouble on these points, the average salesperson typically does not have the knowledge or authority to do so. In the end, it is usually the company that bears the burden of the legal mess, as the salesperson is let off the hook because he or she is merely acting as an agent for the employer. Also, the worst downside for the sales rep is that he or she gets terminated.

The next body of law is the Federal Trade Commission Act and its associated Wheeler-Lea Amendment. This combination of laws governs activities that are deemed as “unfair competition.” Most obvious to salespeople is the tendency when out selling to make statements about competitors which are either false, deceptive, or damaging. Other illegal actions include such things as giving kickbacks and bribes to buyers, either in the form of money or merchandise for personal use. The final significant areas of illegal activities are: misrepresenting the quality of the products being sold; deceptive advertising about pricing, free products, special “discounts;” and misleading claims that are part of the inducement to purchase a product or service.

With the growth of tele-sales today, an entirely new group of laws have been put into effect. For example, people can rescind their decision to buy something within 72 hours if they were solicited over the phone or through the mail. Also, the hours in which telephone sales calls can be made to residences are now restricted.

Now that the legal side has been reviewed, what about the ethics side? Well, the first thing to acknowledge is that the line between the two becomes increasingly blurred when the topic of sales arises. In fact, probably no other line of work has so many opportunities to do something which is classified as legal, but the action itself is unethical. More often than not, unethical behavior occurs when it will directly benefit the salesperson — otherwise why would anyone subject themselves to such behavior in the first place? Take the sales rep who entertains a buyer at lunch and encourages that person to have a couple of alcoholic drinks in order to get him or her loosened up. Then the sales rep lays on some fancy closing techniques that literally catch the buyer off guard to the point they sign the order over lunch. Illegal? No. But unethical? Very much so!

The primary reason salespeople cave in is due to pressure, and that pressure comes from a variety of sources. Previously discussed was the buyer who demands special pricing or other concessions in order to place an order. Other sources are sales managers who refuse to miss making their sales quotas for fear of losing their annual bonus or having their potential for promotion ruined. Sales reps are literally ordered to make sales “at all costs” under these circumstances. Another is the spouse who wants a bigger house, newer car or other pleasures of life so the family can appear to be “keeping up” with the Jones’s next door. There is no limit to how and when these pressures can hit a salesperson. For example, take a well-adjusted sales rep that honors a strong personal code of conduct. How do you think he or she will act out in a sales territory after finding out they now need to spend their entire life savings to pay for an operation for their young child because the procedure is not covered by their health insurance?

Another interesting element that affects ethics is the concept of the risk-reward ratio. In this scenario, a salesperson is financially rewarded more as the level of risk is increased. For example, sales positions in highly competitive markets offer greater income possibilities because the chances for failure are likewise greater. Salespeople in these situations quickly learn that personal actions control the level of money that can be made. The result is often very tempting opportunities that arise which drive a salesperson to exceed the limits of what is right.

The final facet of the ethics problem is what is referred to as role conflict. This is where the salesperson is caught between doing what is best for the employer versus what is best for the prospect or customer. A frequent scenario is a temporary price reduction due to an upcoming marketing promotion . In this case the customer is ready to make the purchase decision right now, yet could save 20 percent by waiting a couple of weeks. The trouble here is the promotion has not yet been announced to the public and if the sales rep voluntarily tells everyone, then he or she will have no orders to turn in for several weeks. And of course, you know what the response of the sales manager would be: Keep your mouth shut!

But what about the customer who relies on the salesperson to also act in the best interests of the client? How are they going to feel about this sales rep after learning by waiting they could have saved money — especially if they didn’t need the merchandise right away?

© 2005 National Assn. of Sales Professionals.

This article is reprinted from the website of the National Association of Sales Professionals as part of their Ethics Study Guide. After reading this overview of sales ethics, NASP members are encouraged to review the group’s series of ethical case studies and consider how the principles of honor and ethics can be applied in “real world” situations — Chivalry Today readers are invited to do the same. This article is reprinted courtesy of the NASP and may not be reproduced in any way without their permission.