Deck 2: Ethical and Legal Issues in Selling

Question 1

In many states in the United States,customer records are considered trade secrets.

Answer 1

True

Question 2

A noncompete clause prevents employees from leaving the company until a specified amount of time has passed.

Answer 2

False

Question 3

Most sales situations are not covered by laws.

Answer 3

True

Question 4

In the early days of selling,companies studied and wrote down the sales pitches of their most successful people,and created canned sales pitches.

Question 5

Salespeople engage in backdoor selling only when they are about to get an order.

Question 6

Offering information about a customer's competitor in exchange for an order is unethical.

Question 7

It is ethical to take over potential customers' accounts from other salespeople.

Question 8

Tampering with a competitor's product in a store to make the product less appealing is unethical conduct.

Question 9

Persuasion is unethical,whereas manipulation is ethical.

Question 10

When spending from their company's expense accounts,salespeople should act as though they are spending their own money.

Question 11

Statements such as "The performance of this product is top-notch" can be classified as expressed warranties.

Question 12

What is ethical can vary from country to country and from industry to industry.

Question 13

It is easy to develop a reimbursement policy that prevents salespeople from cheating and yet allows them the flexibility to cover their territory and entertain customers.

Question 14

Because salespeople's activities in the field cannot be closely monitored,their employers trust them to act in the company's best interests.

Question 15

Spreading rumors about a colleague's sexual conduct cannot be considered sexual harassment.

Question 16

When an item is shipped under contract terms that call for FOB (free on board)factory,the buyer assumes responsibility for any loss or damage incurred during transportation.

Question 17

Bribes typically have no negative consequences for the purchasing agent's firm-only for the purchasing agent as an individual.

Question 18

Most salespeople are agents because they have the power to solicit even non-written offers from buyers.

Question 19

A salesperson should only give a gift to a purchasing agent if that gift will foster a mutually beneficial,long-term relationship.

Question 20

The Uniform Commercial Code (UCC)is the only legal guide to commercial practice in the United Nations.

Question 21

U.S.privacy laws are more stringent than those of the European Union.

Question 22

Calvin sells hospital supplies.When his company did not make it to the approved list of suppliers developed during a vendor analysis by a chain of nursing homes,he went against the purchasing department's policy and contacted nurses and other staff directly to persuade them to get the purchasing department to place his company on its approved list of suppliers.Calvin engaged in:

A) backdoor selling.
B) expanded prospecting.
C) sales prospecting.
D) a lateral attack.
E) bypass selling.

Question 23

Javier,a new insurance agent,pays one of his customers to buy his firm's insurance product.Javier explains to the customer that he would pay the customer a few thousand dollars if the customer decides to invest in the policy recommended by Javier.This is an example of:

A) sales puffery.
B) a conspiracy.
C) kickbacks.
D) bribery.
E) collusion.

Question 24

Rodney is a senior salesperson in a pharmaceutical company.Every time Jeff places an order of 2,000 units from the company,Rodney pays 7 percent of the total amount of sales to Jeff for helping him achieve his sales targets.This is an example of a:

A) bribe.
B) commission.
C) refund.
D) kickback.
E) rebate.

Question 25

The Foreign Corrupt Practices Act (FCPA)made it legal for U.S.companies to engage in conspiracy.

Question 26

Salespeople engage in _____ when they ignore a purchasing agent's (PA's)policy against contacting other employees without the PA's permission and directly contact other people involved in the purchasing decision.

A) backdoor selling
B) expanded prospecting
C) sales prospecting
D) hustling
E) bypass selling

Question 27

The Robinson-Patman Act forbids product differentiation.

Question 28

The credulous person standard means that the company and the salesperson have to pay damages if a reasonable person could misunderstand the claims made in advertisements by the company and the salesperson.

Question 29

The U.S.laws concerning bribery are much more restrictive than laws in Italy and Germany.

Question 30

Ray is a new salesperson in an automobile manufacturing company.In order to meet his sales target,he regularly steals potential customers of other salespeople in his team.This is an example of:

A) collusion.
B) a conspiracy.
C) insider selling.
D) poaching.
E) upselling.

Question 31

When a salesperson tells a customer that a product will last a lifetime,such a claim is most likely an example of sales puffery.

Question 32

One method that companies can use to protect themselves when an employee violates the law,is to include the Foreign Corrupt Practices Act (FCPA)in the company's code of ethics.

Question 33

Which of the following statements is true about ethics?

A) Ethics do not change with time.
B) There is no need for personal codes of ethics.
C) Ethical principles establish appropriate behavior.
D) What is ethical in the Middle East is also ethical in the United States.
E) If an act is unethical,it is also illegal.

Question 34

The rules of the federal Do-Not-Call Registry apply to business phones and to solicitations by nonprofits and political organizations.

Question 35

U.S.salespeople are subject to U.S.laws,regardless of the country they are selling in.

Question 36

Which of the following statements is true about a noncompete clause?

A) It states that competing firms cannot engage in price discrimination.
B) It states that competing firms should not engage in collusion.
C) It has the same legality in all U.S.states.
D) It limits an employee from working for a competitor.
E) It states that competing firms should not buy from a single manufacturer.

Question 37

Which of the following questions should one ask oneself to determine whether a sales behavior or activity is unethical?

A) Would my supervisor disapprove of this behavior?
B) Am I concerned about the possible consequences of this behavior?
C) Would society be worse off if everyone engaged in this behavior or activity?
D) Would I be embarrassed if a customer found out about this behavior?
E) All of these

Question 38

Tying agreements stipulate that a seller is only allowed to sell products to a single buyer.

Question 39

Which of the following statements is true about Lincoln Law?

A) It is commonly referred to as the Do-Not-Call law.
B) It was passed in 1863 and restricted salespeople in the United States from engaging in direct trade with its neighboring countries.
C) It removed the credulous person standard law during the Civil War in 1863.
D) It encouraged citizens to press claims against vendors that fraudulently sold to the U.S.government.
E) It repealed the noncompete clause in the southern U.S.states.

Question 40

Larry,an inexperienced sales rep,has asked you to suggest ways to deal with potential ethical problems.What should you suggest?

A) It's only unethical if it is illegal.
B) Do what the other sales reps do.
C) Do whatever earns profits for your company.
D) Perform whatever services your client requests.
E) Develop and maintain a personal code of ethics.

Question 41

Jordon is a salesperson in a cosmetic firm.While selling a product to a customer,he lies to the customer that other competitors in the market use banned substances in their products.This is an example of:

A) upselling.
B) browbeating.
C) collusion.
D) business defamation.
E) ethical imperialism.

Question 42

Kevin purchased a lawn mower.The blades were so dull that the mower could not cut the grass in his backyard.Because of existence of _____ warranties,Kevin can return the mower and expect to receive a replacement that will cut grass.

A) communicated
B) applied
C) functional
D) implied
E) codified

Question 43

Which of the following statements is true about written agreements?

A) They are the same for all types of products.
B) They contain details about the seller's profits and the buyer's profits.
C) They exclude statements about a product's warranty.
D) They are normally required for sales over $500.
E) They are valid only if they contain a noncompete clause.

Question 44

When a purchasing agent bought an order of sheet aluminum (used to make cans)from a new supplier,the salesperson specified the details of the product's quality.However,when the purchasing agent received the order,he noticed that the aluminum sheets were of inferior quality.Which of the following has the salesperson violated?

A) The tying agreement
B) The impressed guarantee
C) The binding contract
D) The expressed warranty
E) None of these

Question 45

If the terms of the contract specify FOB (free on board)destination,then:

A) any loss or damage incurred during transportation is the responsibility of the seller.
B) the buyer is responsible for any loss during transportation.
C) the buyer assumes the responsibility and risk for the merchandise as soon it leaves the factory.
D) the buyer gets the title to the goods as soon as the invoice is made by the seller.
E) the goods are being sold on consignment.

Question 46

Which of the following statements is true about the Uniform Commercial Code (UCC)?

A) It is one of the main statutory laws governing salespeople in the United States.
B) It is more specific than other laws and has little effect on salespeople.
C) It excludes domestic trade.
D) It was first published in 1998.
E) It is regulated by the Federal Trade Commission.

Question 47

When James sold protective window bars for a nursing home complex,he specified in the contract that the bars would be shipped FOB factory.According to the UCC,this means that:

A) the bars will not leave the manufacturer until payment had been received in full.
B) the seller has full title to the bars until the nursing home director receives them.
C) the buyer assumes responsibility,cost,and risk for shipping of the bars.
D) the seller does not expect payment for the bars until they are installed.
E) the delivering company assumes title for the bars while they are in transit.

Question 48

How does a sale differ from a contract to sell?

A) Cash must change hands for a contract to sell to exist,but not for a sale to be completed.
B) The UCC defines a sale and a contract to sell as synonymous.
C) A sale is made when the salesperson makes an offer and receives unqualified acceptance,while a contract to sell exists only when the title passes from the seller to the buyer.
D) A contract to sell exists anytime a salesperson makes an offer and receives unqualified acceptance from the customer,while a sale is made only when the title passes from the seller to the buyer.
E) A sale is made as soon as a buyer agrees to a price,while a contract to sell exists as soon as a seller gives an offer.

Question 49

Which of the following statements is true about tying agreements?

A) They usually increase competition among firms.
B) They become null and void when a buyer is required to purchase one product in order to get another product.
C) They are mandatory for verbal contracts.
D) They are illegal under the Clayton Act.
E) They become legal only when they contain a noncompete clause.

Question 50

If the terms of the contract specify FOB (free on board)factory,then:

A) the seller has title until the goods are received at the destination.
B) the seller is responsible for any loss during transportation.
C) the buyer assumes the responsibility and risk for any loss during transportation.
D) the seller does not expect payment for the merchandise until it reaches its destination.
E) the goods are being sold on consignment.

Question 51

In the context of incentives given by a producer to a reseller's salespeople,a spiff is considered legal only if:

A) the producer's goods are sold on credit.
B) customers approve of the incentive structure.
C) the reseller approves of the incentives,and it is offered to all the reseller's salespeople.
D) a salesperson engages in resale price maintenance.
E) the reseller includes the incentives in the selling cost of the product.

Question 52

According to UCC,orders become contracts to sell when:

A) the salesperson quotes the specific terms involved in the purchase.
B) goods are transferred from the seller to the buyer for a consideration known as price.
C) they are signed by an authorized representative of the salesperson's company.
D) money changes hands.
E) the title for the product is exchanged.

Question 53

According to the Uniform Commercial Code (UCC),a sales presentation is usually considered to be:

A) an offer.
B) a verbal contract.
C) an invitation to negotiate.
D) an interaction where payment for goods is made.
E) an interaction where the title of goods is exchanged.

Question 54

Statutory laws:

A) include regulations developed by the Federal Trade Commission.
B) grow out of court decisions.
C) include regulations developed by the Better Business Bureau.
D) are based on legislation passed either by state legislatures or by Congress.
E) are established by local,state,and federal regulatory agencies.

Question 55

The Foreign Corrupt Practices Act (FCPA)legalizes:

A) subordination payments when they are made by government officials.
B) spiffs when they are paid with the customer's approval.
C) small lubrication payments when they are customary in a culture.
D) backdoor selling when goods are selling below their resale price.
E) kickbacks when they are in the form of expensive gifts.

Question 56

According to UCC,a sale is made:

A) when the salesperson makes an offer.
B) when the client accepts the offer and agrees to buy.
C) before the title exchanges hands.
D) when the contract is completed and the title exchanges hands.
E) when the contract is signed.

Question 57

The _____ is the most active regulatory agency in developing administrative laws affecting salespeople.

A) U.S.Patent Office
B) Federal Trade Commission
C) Environmental Protection Agency
D) Federal Communications Commission
E) Food and Drug Administration

Question 58

Which of the following acts may be considered sexual harassment?

A) Milton tells pornographic jokes to his secretary.
B) Nora repeatedly comments on her co-worker's sexual reputation.
C) Sybil shows a set of obscene playing cards to her subordinates.
D) Manning makes lewd comments to his colleague.
E) All of these

Question 59

The accounting of sales and costs of many new technology products has resulted in many ethical and legal controversies.Often,the shelf life of a new product is difficult to assess and,therefore,how to allocate sales and costs is debatable.A court decision provides guidelines to address these issues.The court decision is an example of:

A) UCC codification.
B) administrative law.
C) common law.
D) statutory law.
E) all of these.

Question 60

_____ laws are established by local,state,or federal regulatory agencies.

A) Common
B) Administrative
C) Functional
D) Executive
E) Statutory

Question 61

To speed up the opening of a new factory in a Middle Eastern country,Micah gifted a pen and pencil set that he had purchased for $10 to an assistant in a local government.Micah hoped this gift would remove some of the red tape that was slowing down the building process.This type of gift is referred to as:

A) collusion.
B) subordination.
C) capitulation.
D) indemnification.
E) lubrication.

Question 62

A group of uniform rental companies agreed that they would not charge less than $5 per week per uniform even before the newly opened chicken plant contacted them for bids.This is an example of:

A) business defamation.
B) a contrivance.
C) price discrimination.
D) collusion.
E) a conspiracy.

Question 63

A steel manufacturing company helps the local government in a city build a railroad bridge.The company offers the city manager and the mayor a bribe of $50,000 to relax restrictions placed on the company's operations in the city.This is an example of:

A) extortion.
B) subordination.
C) embezzlement.
D) collusion.
E) lubrication.

Question 64

_____ is the view that ethical standards in one's home country should be applied to one's behavior across the world.

A) Ethical imperialism
B) Ethical ombudsmen
C) Ethical solidarity
D) Cultural relativism
E) Cultural solidarity

Question 65

Which of the following is an example of reciprocity?

A) Jack reveals a competitor's secret formula for a plastic hardening compound.
B) Larry's Uniform Company agrees to buy Harry's landscaping services if Harry will rent its uniforms from Larry.
C) A purchasing agent bribes the receptionist to get him an appointment with the company's CEO.
D) In order to carry a line of profitable wind chimes,Scott's Hardware Store also has to carry a less profitable line of hose nozzles made by the same company.
E) A group of kaolin (used in the whitening of paper)manufacturers agree to a price freeze.

Question 66

If the salesperson for a paint manufacturer promised a purchasing agent that a certain brand of paint was mildew-resistant (when it was not),the salesperson:

A) gave an expressed warranty.
B) resorted to collusion.
C) should have given further credibility to the statement by adding,"Let the buyer beware."
D) gave only an implied warranty.
E) none of these.

Question 67

Which of the following statements is true about the Robinson-Patman Act of 1934?

A) It was introduced to eliminate sales puffery.
B) It protects national wholesalers and retailers from independent wholesalers and retailers.
C) It replaced the Federal Trade Commission Act of 1914.
D) It applies only to interstate commerce.
E) It was designed to limit the amount of information a firm could obtain about a consumer.

Question 68

The manufacturer of Kingston freestanding greenhouses gives $100 as an incentive to a reseller's salespeople for each greenhouse they sell.This special incentive is known as:

A) pull money.
B) puffery.
C) a perquisite.
D) a spiff.
E) entertainment allowance.

Question 69

In Canada,where puffery is more closely monitored than in the United States,a salesperson told a customer a particular oven would cook meat better than any other oven in the market.The salesperson might be guilty of violating the:

A) conspiracy and collusion agreement.
B) competitive comparison law.
C) tying agreement.
D) caveat emptor law.
E) credulous person standard.

Question 70

When a perfume manufacturer establishes a minimum price below which a retailer may not sell its perfume,the manufacturer is engaged in:

A) a tying contract.
B) resale price maintenance.
C) price discrimination.
D) collusion.
E) reciprocity.

Question 71

_____ occurs when salespeople make unfair or untrue statements to customers about a competitor,its products,or its salespeople.

A) Collusion
B) Business defamation
C) Conspiracy
D) Reciprocity
E) Tying agreement

Question 72

Court decisions related to the Robinson-Patman Act define _____ as a seller giving unjustified special prices,discounts,or services to some customers and not to others.

A) reciprocity
B) a spiff
C) price discrimination
D) a tying contract
E) business deception

Question 73

A salesperson tells a customer that his firm's product would completely remove all rashes and burn marks on the human skin within 7 hours of its application.This is an example of:

A) puffery.
B) a spiff.
C) reciprocity.
D) an implied warranty.
E) a spam.

Question 74

Which of the following is an example of a tying agreement?

A) Jon refuses to buy office supplies from anyone but Bridget.
B) In order to carry a highly successful organic cleaning compound,Nature's Survival Store has to carry a much less successful line of laundry detergent made by the same company.
C) Traveler's Rest,a travel agency,agrees to buy its insurance from the Nathan Dean Insurance Agency if the agency agrees to let Traveler's Rest handle the owners' travel plans.
D) A paper supply company agrees to give Harridan Industries a free case of paper towels for every dozen cases it purchases.
E) A salesperson tells a contractor that his company's paint is mildew resistant when it is not.

Question 75

Two alloy manufacturers agree to charge the same price for a product to a potential customer who is considering buying alloy from one of these manufacturers.This is an example of:

A) price discrimination.
B) a tying agreement.
C) sales puffery.
D) collusion.
E) upselling.

Question 76

_____ refers to competitors working together while the customer is making a purchase decision.

A) Defamation
B) A tying contract
C) A conspiracy
D) Reciprocity
E) Collusion

Question 77

The _____ Act requires written notification to customers regarding privacy policies.

A) Robinson-Patman
B) Gramm-Leach-Bliley
C) Sarbanes-Oxley
D) FOB notification
E) Federal Do-Not-Call Registry

Question 78

_____ involves small sums of money or gifts,typically made to low-ranking managers or government officials,in countries where these payments are not illegal.

A) Embezzlement
B) Subordination
C) Lubrication
D) Collusion
E) Extortion

Question 79

_____ involves paying large sums of money to higher-ranking officials to get them to do something illegal or to ignore an illegal act.

A) Collusion
B) Subordination
C) Capitulation
D) Indemnification
E) Lubrication

Question 80

Robin is selling a Local Area Network (LAN)system to a company that oversees the renovation of dingy,old downtown districts into attractive shopping areas.Which of the following statements by the seller might be construed as an expressed warranty?

A) Maintain a hardcopy of every memo that you try to send until you are comfortable with the system.
B) Don't worry if it breaks down;our service people will be able to get it running again quickly.
C) Be sure to ask your employees to attend the training session.
D) Please read the instruction manual before you try to use the system.
E) None of these