Chapter 6, Retailing

Legal and Ethical Behavior

Final external environmental factor that governs retailing

Ethical and Legal Constraints Influencing Retailers:

• Federal Laws
• State and Local Laws
• Ethical Behavior

Primary US Laws effecting Retailers:

• Sherman Act; 1890 Competition

• Clayton Act; 1914 Competition

• Federal Trade Commission Act; 1914 est. FTC

• Robinson-Patman Act; 1936 Price discrimination

• Wheeler-Lea Amendment; 1938 deception as well as competition

• Lanham Act; Trademark, 1946

• Celler-Kefauver Antimerger Act; 1950 competition

• Hart-Scott-Rodino Act; Anti trust, 1976

Laws designed to protect consumers include:

• Mail Fraud Act
• Pure Food and Drug Act
• Flammable Fabrics Act
• Automobile Information Disclosure Act
• Fair Packaging and Labeling Act
• Child Safety Act
• Truth in Lending Act
• Fair Credit Reporting Act
• Consumer Product Safety Act
• Magnuson-Moss Warranty/FTC Improvement Act
• Equal Credit Opportunity Act

Product labeling in Europe: Horsemeat

Drinkers sue Anheuser-Busch for 'watering down' beer

Changing laws:

• National Retail Federation (State of the Union impact on Retailers)

  Retail Industry Leaders Association > (RILA) Public Policy Agenda

  Why You Should Care About an Internet Sales Tax

  Open Secrets: H.R. 3179

  Pricing Constraints:

  • Horizontal price fixing

  • Vertical price fixing (Retail Price Maintenance ongoing)

  • price discrimination (does not apply to service: mall rentals)

  • deceptive pricing

  • predatory pricing

  CBS2 Investigates Questionable Price Tags At Several Kohl’s Department Stores

  What Is Minimum Advertised Price?

  Web sites change prices based on customers' habits

  Promotion Constraints: Federal Trade Commission Act; Wheeler-Lea Amendment

  • Deceptive sales practices

  • Deceptive advertising

  • Deceitful diversion of patronage

  Puffery: America's Best Salad. An opinion, versus a statement of fact. Test: is the consumer misled ? Is the deception material ?

  Atlanta retail shops busted for selling nearly $2 million in counterfeit items

  Product Constraints

  • Product liability laws (forseeable doctrine)
  • Warranties (expressed versus implied)
  WSJ: E-Cigarettes Draw Fire From legislators

  Supply-chain Constraints:

  • Territorial restrictions
  • Dual distribution,
  • One-way exclusive dealing
  • Two-way exclusive dealing
  • Tying agreement

  State and Local Regulations

  • Zoning Laws
  • Safety Practices
  • Unfair Trade Practices
  • Building Safety Regulations
  • Blue Laws (Weird laws, blue laws, Delaware laws)
  • Franchise Laws
  • Tax Laws (no sales tax in Delaware)

  Gun laws by state

  Selling beer in Gas Stations, selling beer on Sunday

  Delaware.gov

  Ethics in Retailing

  Set of rules for human moral behavior. Laws are codified ethics.

  Explicit versus implicit code of behavior.

  Buying merchandise

  • Product quality
  • Sourcing
  • Slotting fees (profit from buying versus selling)
  • Bribery
  • Markdown money

  Supplier Responsibility at Apple

  Gap: Report of kids' sweatshop 'deeply disturbing' 2007

  Selling merchandise

  • Product sold
  • Selling practices
  • Data gathering
  National Retailer Federation Principles of Customer Data Privacy

  How Companies Learn Your Secrets Target

  Wal-Mart knew about Mexico bribery in 2005, say lawmakers

  Transparency.org

  Foreign Corrupt Practices Act