Legal And Ethical Behavior
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Transcript of Legal And Ethical Behavior
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Chapter 6
Legal and Ethical Behavior
Retailing, 6th Edition. Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved.
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Learning Objectives
1. Explain how legislation constrains a retailer’s pricing policies.
2. Differentiate between legal and illegal promotional activities.
3. Explain the retailer’s responsibilities regarding the products sold.
4. Discuss the impact of governmental regulation on a retailer’s behavior with other supply chain members.
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Learning Objectives
5. Describe how various state and local laws, in addition to federal regulations, must also be considered in developing retail policies.
6. Explain how a retailer’s code of ethics will influence its behavior.
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Ethical and Legal Constraints Influencing Retailers
Exhibit 6.1
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Primary U.S. Laws that Affect Retailing
Exhibit 6.2
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Primary U.S. Laws that Affect Retailing
Exhibit 6.2
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Examples of Laws Designed to Protect Consumers
Exhibit 6.3
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Pricing Constraints
Horizontal Price Fixing Vertical Price Fixing Price Discrimination Deceptive Pricing Predatory Pricing
LO 1
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Pricing Constraints
Horizontal Price Fixing:
Occurs when a group of competing retailers (or other channel members operating at a given level of distribution) establishes a fixed price at which to sell certain brands of products.
LO 1
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Pricing Constraints
Exhibit 6.4 LO 1
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Pricing Constraints
Vertical Price Fixing:
Occurs when a retailer collaborates with the manufacturer or wholesaler to resell an item at an agreed-on price.
LO 1
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Pricing Constraints
Price Discrimination:
Occurs when two retailers buy an identical amount of “like grade and quality” merchandise from the same supplier but pay different prices.
LO 1
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Price Discrimination
Cost justification defense.
Changing market defense.
Meeting competition in good faith defense.
LO 1
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Pricing Constraints
Deceptive Pricing:
Occurs when a misleading price is used to lure customers into the store; usually there are hidden charges or the item advertised may be unavailable.
LO 1
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Pricing Constraints
Predatory Pricing:
Exists when a retail chain charges different prices in different geographic areas to eliminate competition in selected geographic areas.
LO 1
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Promotion Constraints
Deceitful Diversion of Patronage Deceptive Advertising Deceptive Sales Practices
LO 2
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Promotion Constraints
Palming Off:
Occurs when a retailer represents that merchandise is made by a firm other than the true manufacturer.
LO 2
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Promotional Constraints
Exhibit 6.5 LO 2
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Deceptive Advertising
Deceptive Advertising:
Occurs when a retailer makes false or misleading advertising claims about the physical makeup of a product, the benefits to be gained by its use, or the appropriate uses for the product.
LO 2
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Deceptive Advertising
Bait-and-Switch Advertising:
Advertising promoting a product at an unrealistically low price to serve as “bait” and then trying to “switch” the customer to a higher-priced product.
LO 2
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Deceptive Sales Practices
Failing to be honest or omitting key facts in either ad of the sales presentation.
Using deceptive credit contracts.
LO 2
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Product Constraints
Product Safety Product Liability Warranties
LO 3
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Product Constraints
Exhibit 6.6 LO 3
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Product Constraints
Product Liability Laws:
Deal with the seller’s responsibility to market safe products. These laws invoke the “foreseeability” doctrine, which states that a seller of a product must attempt to foresee how a product may be misused and warn the consumer against hazards of misuse.
LO 3
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Product Constraints
Expressed Warranties:
Are either written or verbalized agreements about the performance of a product and can cover all attributes of the merchandise or only one attribute.
LO 3
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Product Constraints
Implied Warranty of Merchantability:
Is made by every retailer when the retailer sells goods and implies that the merchandise sold is fit for the ordinary purpose for which the such goods are typically used.
LO 3
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Product Constraints
Implied Warranty of Fitness:
Is a warranty that implies that the merchandise is fit for a particular purpose and arises when the customer relies on the retailer to assist or make the selection of goods to serve a particular purpose.
LO 3
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Supply Chain Constraints
Territorial Restrictions Dual Distribution Exclusive Dealing Tying Agreements
LO 4
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Supply Chain Constraints
Territorial Restrictions:
Are attempts by the supplier, usually a manufacturer, to limit the geographic area in which a retailer may resell merchandise.
LO 4
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Channel Constraints
Exhibit 6.7 LO 4
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Supply Chain Constraints
Dual Distribution:
Occurs when a manufacturer sells to independent retailers and also through its own retail outlets.
LO 4
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Dual Distribution
Ralph Lauren has a dual distribution strategy where it markets its Polo brand apparel through its own retail stores as well as through traditional department stores.
LO 4
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Exclusive Dealing
One-Way Exclusive Dealing:
Occurs when the supplier agrees to give the retailer the exclusive right to merchandise the supplier’s product in a particular trade area.
LO 4
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Exclusive Dealing
Two-Way Exclusive Dealing:Occurs when the supplier offers the retailer the exclusive distribution of a merchandise line or product in a particular trade if in return the retailer will agree to do something for the manufacturer such as heavily promote the supplier’s products or not handle competing brands.
LO 4
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Tying Agreements
Tying Agreement:
Exists when a seller with a strong product or service requires a buyer (the retailer) to purchase a weak product or service as a condition for buying a strong product or service.
LO 4
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Other Federal, State, and Local Laws
Zoning Laws Taxing Laws Franchise Laws Blue Laws Unfair Trade Laws Building Safety Regulations
LO 5
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State, and Local Regulations Affecting Retailers
Exhibit 6.8 LO 5
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Ethics in Retailing
Ethical Behavior in Buying Merchandise Ethical Behavior in Selling Merchandise Ethical Behavior in Retailer-Employee
Relationship
LO 6
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Ethics in Retailing
Ethics:
Is a set of rules for human moral behavior.
LO 6
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Ethics in Retailing
Explicit Code of Ethics:
Consists of a written policy that states what is ethical an unethical behavior.
LO 6
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Ethics in Retailing
Implicit Code of Ethics:
Is an unwritten but well understood set of rules or standards of moral responsibility.
LO 6
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Ethical Behavior in Buying Merchandise
Product Quality Sourcing Slotting Fees Bribery
LO 6
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Ethical Behavior in Buying Merchandise
Slotting Fees (Slotting Allowances):
Are fees paid by a vendor for space or a slot on a retailer’s shelves, as well as having its UPC number given a slot in the retailer’s computer system.
LO 6
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Ethical Behavior in Buying Merchandise
Markdown Money:
Is what retailers charge to suppliers when merchandise does not sell at what the supplier intended.
LO 6
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Ethical Behavior in Selling Merchandise
Products Sold Selling Practices
LO 6
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Ethical Behavior in Selling Merchandise
Home Depot’s no commission sales approach does not put the sales person at odds with the customer. However, given Home Depot’s self-service operation, paying a commission would be difficult.
LO 6
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Ethical Behavior in the Retailer-Employee Relationship
Misuse of Company Assets Job Switching Employee Theft
LO 6
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National Retail Federation Principles on Customer Data Privacy
Exhibit 6.9 LO 6
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Additional Slides
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Price Discrimination
Justifications Meet Competition in Good faith
Changing Market
Cost Justifications
LO 1
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Promotional Constraints
Promotion Decisions
Deceptive sales practices
Deceitful diversion
of patronage
Deceptive advertising
LO 2
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Product Constraints
ProductLiability
ProductWarranties
ProductSafety
ProductDecisions
LO 3