ISMM Unit U201understanding Laws and Ethics of Selling

ISMM Unit U201Understanding Laws and Ethics of Selling

1. Understand the Laws affecting selling in an organisation

Overview

As a professional salesperson it is vitally important that you properly understand the law. It is also very important that youknow about regulatory and voluntary codes of practice. Working to codes of practice is essential to maintain professional integrity, and it is this integrity that allows you to achieve sales against less scrupulous competitors. I you are travelling overseas as a salesperson you should make a point of familiarising yourself with the common law of the countries and territories you are visiting; in many cases your failure to do so could lead to imprisonment or deportation, which of course would be disastrous.

Following several mis-selling scandals in the UK and USA there is now much more sensitivity to sales practices that could possibly be interpreted as unethical. As a wise salesperson you will ensure that you and your organisation benefits by adopting a principled, ethical approach to all that you do.

Laws are rules set by society and enforced by a political authority.

1.1 Identify the laws affecting selling in an organisation

As a professional salesperson you will want to be fully aware of all the legal factors relevant to your role. Much of this information will be available from your organisation itself. However, as an ethical professional it is in yours, your employers and your customers’ interests to develop and maintain as much expertise as you can in your own right. This is exactly the same professional principle as being an expert in your offering and understanding how each of your customers will benefit from owning or using your products and services.

The internet is a very accessible source of all kinds of information, and you will find plenty of sites that carry details that will help you. Be careful to validate information obtained this way and use official sites to help you understand the actual law, rather than some of the more opinionated sources that are available.

In the UK, the government website a good starting place for information on regulatory and voluntary codes of practice. There will be information that is specific to your industry and product or service offerings.

Some areas you may wish to explore in depth are:

• Buyers' terms and conditions and unfair contract terms

Remember that business purchasers of goods and services don't have the same automatic protection as consumers.

• Consumer credit

The rules on consumer credit are complex and there is a wealth of information at which the Office of Fair Trading part of the government website.You will find an overview of the rules about consumer credit and whether your business needs a consumer credit licence.

• Customer protection

Follow the Consumer protection part of the site for an introduction to the rights of customers when buying goods or services from you.

• Fair trading, trade descriptions and Trading Standards

Here you can access details of the fair-trading laws, trade descriptions and the role of TradingStandards.

• Privacy and data protection in direct marketing

Understand the steps you must take to protect your customers' personal information, including the rules on unsolicited emails and telephone calls.

• Product labelling and packaging

You will find an introduction to the law on marking prices and labelling products and related information here.

• Returns and refunds, warranties and complaints

An introduction to the rights customers have when buying goods or services from you is available here.

• Sunday trading

Understand the laws that apply to businesses that trade on Sunday.

• The Sale of Goods Act

Keep on the right side of the law when selling to your customers as consumers and private individuals.

• Weights and measures

Understand the rules applying to the sale of goods by weight or other measures such as volume or length.

• Data protection act

Learn about using personal information fairly and lawfully in line with the Data Protection Act 1998.

1.2 Describe how the laws affect selling in an organisation

How does the law affect selling in an organisation? First, it is the duty of the organisation to ensure their goods and services are fit for purpose; this means that the goods do what they can be reasonably expected to do.

Let’s say you’re selling fountain pens, if you advise your customer that the pen is guaranteed not to leak and has a warranty for five years, and then the customer can reasonably expect to have a pen that does not and will not leak for the next five years. If it does, and they report the matter to your company, and if the company does nothing about it, then the customer could take their case to the Director-General of Fair Trade and ultimately could have your company fined.

Here is some useful information about Government Acts, regulations and organisations.

Consumer Protection Act 1987

This Act was introduced to protect consumers from fraud and from unsafe products. It assures consumers that producers or sellers can be held liable for any damage done by defective products.

The act has three parts as follows:

Part 1 implemented European Community (EC) Directives known as the product liability directives, by introducing a regime of strict liability for damage arising from defective products. It is important to note that liability under this act is strict, and there is no need to demonstrate fault or negligence on behalf of the producer. Nor can liability be "written out" by an exclusion clause.

Part 2 gave the government powers to regulate the safety of consumer products through Statutory Instruments. Note here that Section 2 defines a defect as being present when "the safety of the product is not such as persons generally are entitled to expect". Safety is further defined as to apply to products that are component parts or raw materials in other products, and to risks to property as well as risks of death and personal injury.

Part 3 defined a criminal offence of giving a misleading price indication.It then became a crime in consumer law to give a misleading price indication in the course of business.

The General Product Safety Regulations (GPS) 2005

The regulations state that the selling organisation must only sell products that are safe in normal or reasonable foreseeable use. This is why we rarely find second hand shops and charity shops selling second hand electrical goods any more.

Fines of up to £20,000 and up to 12 months in prison could be imposed for companies selling unsafe products.

Office of Fair Trading (OFT)

In 1973 the Fair Trading Act established the OFT. This is the UKs official watchdog and is responsible for overseeing consumer protection. When a trader has been found to be unfair to customers, or is acting in a manner that is against the customers’ interests regarding health, safety and other matters, the OFT can demand that the trader gives a written assurance that he or she will stop acting in this manner.

Consumer Protection from Unfair Trading Regulations 2008

The Consumer Protection from Unfair Trading Regulations 2008 introduces a general duty not to trade unfairly and seeks to ensure that traders act honestly and fairly towards their customers.

There are three main sections in the Consumer Protection from Unfair Trading Regulations (CPR). These are as follows:

• The general ban on unfair commercial practices
• Misleading and aggressive practices which are assessed in light of the effect they have, or are likely to have, on the average consumer
• The Black List which contains the list of those practices which are unfair and thus banned

Misleading actions

Companies are not allowed to use misleading or underhand tactics to get customers to part with their money. Misleading actions include advertising goods that don't exist, or offering just a few items at the advertised price with no hope of meeting large demand.

If your organisation has signed up to a code of practice, then if it fails to follow this code, it could be a breach of the CPRs. For example, if you represent a garage that has signed up to the Motor Industry Code of Practice for Service and Repair, and the garage fails to follow it; this could then constitute a breach of the CPRs.

As a trader you are also banned from lying about goods or passing them off as another product to give them credibility. For example if you say 'we only fit genuine, branded parts', when in reality you fitting non-branded parts to your customers’ cars.

Misleading omissions

Sometimes it's not what's actually said that's the problem. Sometimes it’s what's been left out that's the issue.

The CPRs aim to ensure traders who are economical with the truth, or miss out key information that customers might need to make an informed decision, will be caught out too. As a trader(and therefore as a salesperson) you must make sure you provide information in a timely manner - and not so late that it's of no use to the buyer.

You can be considered misleading if you as a trader do any of the following:

• Omit material information that the average consumer buyer needs, according to the context, to take an informed transactional decision
• Hide or provide material information in an unclear, unintelligible, ambiguous or untimely manner
• Fail to identify the commercial intent of the commercial practice if not already apparent from the context, e.g. by hiding the fact that you are aiming to sell products and services.

You must also ensure that information as always displayed clearly –the law treats an obscure presentation as tantamount to an omission.

Aggressive practices

Your sales tactics can greatly influence a consumer's buying decision. Traders who fail to take no for an answer, refuse to leave until a contract is signed or use threatening behaviour will be committing an offence.By definition, a practice is considered aggressive if the average consumer’s freedom of choice or conduct is significantly impaired.

The legislation contains a list of criteria to help determine whether a commercial practice uses harassment, coercion, including physical force, or undue influence.Undue influence is categorised by something that applies pressure 'even without using or threatening to use physical force, in a way which significantly limits the consumer’s ability to make an informed decision.'

Here are some ways the CPRs may affect you in practice:

If you as a seller are accused of misleading consumers or acting aggressively, it's not enough to simply demonstrate the activity, it also has to be shown that the practice influenced the consumer's decision. However, this doesn't necessarily mean that the consumer has to have entered into a contract, just that their actions were influenced in some way. It could be enough that the consumer phoned you or decided to go into your shop or showroom.

Banned practices

In addition to tackling misleading and aggressive behaviour, the CPRs outlaw 31 specific practices such as claiming something is free when it's not and they also outlaw persistent cold-calling.

Please be aware that with these 31 practices it is enough simply to demonstrate wrongdoing, and there is no need for a complainant to show that it influenced thecustomer’s decision in any way.

The banned practices under the CPR’s are to there to ensure that traders, salespeople, marketing professionals and customers are clear about what is prohibited.

The list of banned practices includes the following:

• Bait advertising:such as luring the consumer with attractive advertising around special prices when you as the seller know that you cannot offer that product, or you only have a few in stock at that price.
• Bait and switch: for example promoting one product with the intention of selling your customer something different
• Limited offers: if you falsely state that a product will only be available for a very limited time, or that it will only be available on particular terms for a very limited time, in order to elicit an immediate decision and deprive your customers of sufficient opportunity or time to make an informed choice.
• False free offers: such as describing a product as free or without charge if the consumer has to pay anything other than the unavoidable cost of responding to the offer and collecting or paying for delivery of the item.
• Pressure selling: if you try to create the impression that the customer cannot leave your premises until a contract is formed.
• Aggressive doorstep selling: for example conducting personal visits to the consumer's home ignoring the consumer's request to leave or not to return.

The above represent some of the more commonly met items on the banned list. It would be wise for you to check all of them particularly with relevance to the type of business and industry that you are working in.

Cross border trading

The CPRs also aim to clarify consumers’ rights and simplify the process of cross-border trade.

These regulations are therefore intended to give customers the same protection against unfair practices and rogue traders whether they are buying from their corner shop or purchasing from a website based in Spain.

This also means that your business can advertise and market to all 480 million consumers in the EU, in the same way as to your domestic customers.The principle aim is to boost consumer confidence and give business a uniform and transparent EU wide set of rules.

By demonstrating your ethical practices and following these regulations carefully you will maximise your sales through increased customer confidence and further recommendations.

Product Liability

Here is an example of a situation which needed to be settled using legal help.

Fenton’s Solicitors dealt with a case involving a young child who was injured as a result of a faulty design mechanism in the handle of a tricycle.

The pin that held the handle together was too short to keep the handlebars in place. As the child was using the tricycle the handlebars completely came away. Without any way to control the tricycle it hurtled down the garden path and crashed into concrete steps causing a nasty injury to his head.

The tricycle was made in China and imported by Argos. The parents bought it for their child from the Huddersfield store.

After investigations into liability Argos have accepted that the problem was their fault and has conceded liability.

( retrieved November 2010)

1.3 Describe the consequences for self, organisation and customer if legal requirements are not complied with

In life there are consequences to our actions, not only to us but also to others. If we do not obey the laws of the land, then we risk imprisonment or heavy fines. If an organisation does not comply with consumer laws then they risk a hefty fine.

In today’s society, organisations have to take great care that products and services do ‘what it says on the tin’, or they could face court cases from dissatisfied customers.

The salesperson is often at the front line when it comes to complaints from dissatisfied customers, and must be prepared to listen carefully to complaints as doing so often leads to a practical resolution that rebuilds relationships and reinforces ultimate customer loyalty.

Self

What happens if you don't obey the law? You could be fined or arrested, go to prison, or have a police record.If you go to prison for a few years aside from being denied your freedom, you would be away from family and friends, you would live with other criminals and you would be socially stigmatised.

Regardless of how much time you spend in prison, just being arrested will give you a police record, then you might not be able to get the job you want, take out loans for things you want to buy and you might not be allowed to travel into other countries on holiday.

Organisation

What happens if your organisation doesn’t obey the law?

The sales process – from the initial approach to long after the sale is completed – is controlled by a number of important legal requirements designed to protect customers as described earlier.

Obeying the law can help your organisation build and maintain an honest and trustworthy reputation.

If an organisation is found to be operating outside the law, they risk losing their reputation, being fined and losing business.

Customer

What happens if your customer doesn’t obey the law?

If customers don’t obey the law there are implications for you as a supplier. Let’s say that your customer offers you a gift. This could be viewed as bribery and you could be deemed guilty by association with the customer. Such situations are best avoided by the professional salesperson and many organisations have this written into their employment policies.

Here are some scenarios – have a think about what you would do in each instance

Scenario 1

"You are selling laptop computers in a local computer shop. A customer comes up to you and asks if he can buy a certain model that is out of stock. He needs it urgently by the end of the week. You know that new stock won't be arriving for a fortnight. Your manager has been putting the pressure on you. He says that you need to make more sales. You think that if you tell the customer the truth, he'll go somewhere else and won't buy from you. Should you make the sale, telling the customer that he will get the laptop in time? What would you do?"