Ethics in Marketing & Consumer Protection: Notes | Corporate & Other Laws for CA Intermediate PDF Download

 Page 1


 
 
11 
Ethics in Marketing and Consumer 
Protection 
Learning Objectives 
? To know the ethical dilemmas in marketing 
? To understand the reasons for marketing ethical behaviour 
? To learn the initiatives taken in India towards promoting healthy competition 
? To know the distinction between protecting consumers interest and public interest 
? To know the initiatives taken by the United Nations towards Consumers Welfare 
Next to doing the right thing, the most important thing is to let people know you are doing the 
right thing.   
JOHN D. ROCKEFELLER 
11.1 Ethics and Marketing 
The task of marketers is to influence the behaviour of customers. To accomplish this goal, 
marketers have a variety of tools at their disposal. Broadly speaking, these tools include the 
design of a product, the price at which it is offered, the message used to describe it, and the 
place in which it is made available. 
Ethics are standards of moral conduct. To act in an ethical fashion is to conform to an 
accepted standard of moral behavior. Undoubtedly, virtually all people prefer to act ethically. 
It is easy to be ethical when no hardship is involved – when a person is winning and life is 
going well. The test comes when things are not going well – when pressures build. These 
pressures arise in all walks of life, and marketing is no exception. 
Marketing executives face the challenge of balancing their own best interests in the form of 
recognition, pay, and promotion, with the best interests of consumers, their organizations, 
and society into a workable guide for their daily activities. In any situation they must be able 
to distinguish what is ethical from what is unethical and act accordingly, regardless of the 
possible consequences.  
Page 2


 
 
11 
Ethics in Marketing and Consumer 
Protection 
Learning Objectives 
? To know the ethical dilemmas in marketing 
? To understand the reasons for marketing ethical behaviour 
? To learn the initiatives taken in India towards promoting healthy competition 
? To know the distinction between protecting consumers interest and public interest 
? To know the initiatives taken by the United Nations towards Consumers Welfare 
Next to doing the right thing, the most important thing is to let people know you are doing the 
right thing.   
JOHN D. ROCKEFELLER 
11.1 Ethics and Marketing 
The task of marketers is to influence the behaviour of customers. To accomplish this goal, 
marketers have a variety of tools at their disposal. Broadly speaking, these tools include the 
design of a product, the price at which it is offered, the message used to describe it, and the 
place in which it is made available. 
Ethics are standards of moral conduct. To act in an ethical fashion is to conform to an 
accepted standard of moral behavior. Undoubtedly, virtually all people prefer to act ethically. 
It is easy to be ethical when no hardship is involved – when a person is winning and life is 
going well. The test comes when things are not going well – when pressures build. These 
pressures arise in all walks of life, and marketing is no exception. 
Marketing executives face the challenge of balancing their own best interests in the form of 
recognition, pay, and promotion, with the best interests of consumers, their organizations, 
and society into a workable guide for their daily activities. In any situation they must be able 
to distinguish what is ethical from what is unethical and act accordingly, regardless of the 
possible consequences.  
11.2 Business Law, Ethics and Communication 
 
11.2 Ethical Guidelines 
Many organizations have formed codes of ethics that identify specific acts (bribery, accepting 
gifts) as unethical and describe the standards employees are excepted to live up to. Over 90 
per cent of the Fortune 1,000 companies have ethics codes, as do many smaller business. 
These guidelines lessen the chance that an employee will knowingly or unknowingly violate a 
company’s standards. In addition, ethics codes strengthen a company’s hand in dealing with 
customers or prospects that encourage unethical behavior. For young or inexperienced 
executives, these codes can be valuable guides, helping them to resist pressure to promise 
personal ethics in order to move up in the firm. 
However, every decision cannot be taken out of the hands of the manager. Furthermore, determining 
what is right and what is wrong can be extremely difficult.  It is not realistic for an organization to 
construct a two-column list of all possible practices, on headed “ethical” and the other “unethical.” 
Rather, a marketer must be able to evaluate a situation and formulate a response.  
11.3 Behaving Ethically In Marketing 
Marketing executives should practice ethical behavior because it is morally correct. While 
this is simple and beautiful in concept, it is not sufficient motivation for everyone. So let’s 
consider four pragmatic reasons for ethical behavior: 
? To reverse declining public confidence in marketing. Periodically we hear about 
misleading package labels, false claims in ads, phony list prices, and infringements of 
well established trademarks. Though such practices are limited to only a small 
proportion of all marketing, the reputations of all marketers are damaged.  To reverse 
this situation, business leaders must demonstrate convincingly that they are aware of 
their ethical responsibility and will fulfill it.  Companies must set high ethical standards 
and enforce them.  Moreover, it is in management’s interest to be concerned with the 
well-being of consumers, since they are the lifeblood of a business.  
? To avoid increases in government regulation. Our economic freedoms sometimes have a 
high price, just as our political freedoms, do.  Business apathy, resistance, or token 
responses to unethical behavior simply increase the probability of more government 
regulation. Indeed, most of the governmental limitations on marketing are the result of 
management’s failure to live up to its ethical responsibilities at one time or other. Moreover, 
once some form of government control has been introduced, it is rarely removed. 
? To regain the power granted by society. Marketing executives wield a great deal of 
social power as they influence markets and speak out on economic issues. However, 
there is responsibility tied to that power. If marketers do not use their power in a socially 
acceptable manner, that power will be lost in the long run. 
? To protect the image of the organization. Buyers often form an impression of an entire 
organization based on their contact with one person. More often than not, that person 
represents the marketing function. You may base your opinion of a retail store on the behavior 
Page 3


 
 
11 
Ethics in Marketing and Consumer 
Protection 
Learning Objectives 
? To know the ethical dilemmas in marketing 
? To understand the reasons for marketing ethical behaviour 
? To learn the initiatives taken in India towards promoting healthy competition 
? To know the distinction between protecting consumers interest and public interest 
? To know the initiatives taken by the United Nations towards Consumers Welfare 
Next to doing the right thing, the most important thing is to let people know you are doing the 
right thing.   
JOHN D. ROCKEFELLER 
11.1 Ethics and Marketing 
The task of marketers is to influence the behaviour of customers. To accomplish this goal, 
marketers have a variety of tools at their disposal. Broadly speaking, these tools include the 
design of a product, the price at which it is offered, the message used to describe it, and the 
place in which it is made available. 
Ethics are standards of moral conduct. To act in an ethical fashion is to conform to an 
accepted standard of moral behavior. Undoubtedly, virtually all people prefer to act ethically. 
It is easy to be ethical when no hardship is involved – when a person is winning and life is 
going well. The test comes when things are not going well – when pressures build. These 
pressures arise in all walks of life, and marketing is no exception. 
Marketing executives face the challenge of balancing their own best interests in the form of 
recognition, pay, and promotion, with the best interests of consumers, their organizations, 
and society into a workable guide for their daily activities. In any situation they must be able 
to distinguish what is ethical from what is unethical and act accordingly, regardless of the 
possible consequences.  
11.2 Business Law, Ethics and Communication 
 
11.2 Ethical Guidelines 
Many organizations have formed codes of ethics that identify specific acts (bribery, accepting 
gifts) as unethical and describe the standards employees are excepted to live up to. Over 90 
per cent of the Fortune 1,000 companies have ethics codes, as do many smaller business. 
These guidelines lessen the chance that an employee will knowingly or unknowingly violate a 
company’s standards. In addition, ethics codes strengthen a company’s hand in dealing with 
customers or prospects that encourage unethical behavior. For young or inexperienced 
executives, these codes can be valuable guides, helping them to resist pressure to promise 
personal ethics in order to move up in the firm. 
However, every decision cannot be taken out of the hands of the manager. Furthermore, determining 
what is right and what is wrong can be extremely difficult.  It is not realistic for an organization to 
construct a two-column list of all possible practices, on headed “ethical” and the other “unethical.” 
Rather, a marketer must be able to evaluate a situation and formulate a response.  
11.3 Behaving Ethically In Marketing 
Marketing executives should practice ethical behavior because it is morally correct. While 
this is simple and beautiful in concept, it is not sufficient motivation for everyone. So let’s 
consider four pragmatic reasons for ethical behavior: 
? To reverse declining public confidence in marketing. Periodically we hear about 
misleading package labels, false claims in ads, phony list prices, and infringements of 
well established trademarks. Though such practices are limited to only a small 
proportion of all marketing, the reputations of all marketers are damaged.  To reverse 
this situation, business leaders must demonstrate convincingly that they are aware of 
their ethical responsibility and will fulfill it.  Companies must set high ethical standards 
and enforce them.  Moreover, it is in management’s interest to be concerned with the 
well-being of consumers, since they are the lifeblood of a business.  
? To avoid increases in government regulation. Our economic freedoms sometimes have a 
high price, just as our political freedoms, do.  Business apathy, resistance, or token 
responses to unethical behavior simply increase the probability of more government 
regulation. Indeed, most of the governmental limitations on marketing are the result of 
management’s failure to live up to its ethical responsibilities at one time or other. Moreover, 
once some form of government control has been introduced, it is rarely removed. 
? To regain the power granted by society. Marketing executives wield a great deal of 
social power as they influence markets and speak out on economic issues. However, 
there is responsibility tied to that power. If marketers do not use their power in a socially 
acceptable manner, that power will be lost in the long run. 
? To protect the image of the organization. Buyers often form an impression of an entire 
organization based on their contact with one person. More often than not, that person 
represents the marketing function. You may base your opinion of a retail store on the behavior 
  Ethics in Marketing and Consumer Protection 11.3 
 
of a single sales clerk. As Procter & Gamble put it in an annual report: “When a Procter & 
Gamble sales person walks into a customer’s place of business that sales person not only 
represents Procter & Gamble, but in a very real sense, that person is Procter & Gamble.” 
11.4 Healthy Competition And Protecting Consumer’s Interest 
Competition – Challenges and Changes : Globalisation and progressive liberalization of trade 
during the last decade opened a widening atmosphere giving rise to certain inevitable tasks and 
challenges for every country around the globe. It therefore became imperative for many countries 
to have a new line of rethinking on the existing pattern of policies on trade, customs and usages. 
The World Trade Organisation’s (WTO) treaties and agreements, their implications on trade and 
commerce have already compelled many countries to review their competitiveness of trade and 
economic policies not only within their economy but across the frontiers of other countries also. In 
India, in the recent years, the corporate and economic reforms and policies had pervasive effects 
on the structure of domestic trade and competition. The law which was originally enacted to deal 
with market and competition (i.e., the Monopolies and Restrictive Trade Practices Act, 1969) 
addressed the problems concerning Monopolistic, Restrictive and Unfair Trade Practices only. 
There was no genesis to a comprehensive competition policy since then. Given the fact that the 
structure of world economy and trade has taken rapid strides and undergone vast changes, India 
has been taking adequate steps for integrating itself with the new changes and challenges thereby 
market functioning, positioning becomes effective and competitive. In this regard, Government 
constituted a High Level Committee on Competition Policy and Law on 15.10.1999 under the 
Chairmanship of Mr. S.V.S. Raghavan, to recommend a legislative framework relating to 
Competition Law including mergers and demergers. The Committee submitted its report on 22
nd
 
May 2000. The Government, after considering the report and suggestions from various 
organizations, institutions and general public, introduced the Competition Bill in the Parliament. 
This Bill became an Act after receiving assent from the President on 13
th
 January 2003 and a few 
sections of the Act have already come into force by virtue of two separate Government notifications 
[i.e., S.O.340 (E) dated 31
st
 March, 2003 and S.O.715 (E) dated 19
th
 June, 2003]. This Act extends 
to the whole of India except the State of Jammu and Kashmir.   
What is Competition? 
A broad definition of Competition is “a situation in a market in which firms or sellers independently 
strike for the buyers’ patronage in order to achieve a particular business objective, for example 
profit, sales or market share” (World Bank, 1999).  A pre-requisite for a good competition is trade, 
trade is the unrestricted liberty of every man to buy, sell and barter, when, where and how, of 
whom and to whom he pleases. For a free market to be in existence the handicap is that for a 
given distribution of income of those who can pay the highest price will most be able to purchase 
the goods regardless their relative needs. However, the real culprit is income distribution system 
and not the competitive system. In an unregulated free market, in certain circumstances it could 
be of greater benefit to the owner to withhold goods from market in order to extract a higher price. 
Despite the efforts to regulate prices which have been unsuccessful, the caution in a free market 
as compared to the problems in an unregulated market can be overcome by posturing 
Page 4


 
 
11 
Ethics in Marketing and Consumer 
Protection 
Learning Objectives 
? To know the ethical dilemmas in marketing 
? To understand the reasons for marketing ethical behaviour 
? To learn the initiatives taken in India towards promoting healthy competition 
? To know the distinction between protecting consumers interest and public interest 
? To know the initiatives taken by the United Nations towards Consumers Welfare 
Next to doing the right thing, the most important thing is to let people know you are doing the 
right thing.   
JOHN D. ROCKEFELLER 
11.1 Ethics and Marketing 
The task of marketers is to influence the behaviour of customers. To accomplish this goal, 
marketers have a variety of tools at their disposal. Broadly speaking, these tools include the 
design of a product, the price at which it is offered, the message used to describe it, and the 
place in which it is made available. 
Ethics are standards of moral conduct. To act in an ethical fashion is to conform to an 
accepted standard of moral behavior. Undoubtedly, virtually all people prefer to act ethically. 
It is easy to be ethical when no hardship is involved – when a person is winning and life is 
going well. The test comes when things are not going well – when pressures build. These 
pressures arise in all walks of life, and marketing is no exception. 
Marketing executives face the challenge of balancing their own best interests in the form of 
recognition, pay, and promotion, with the best interests of consumers, their organizations, 
and society into a workable guide for their daily activities. In any situation they must be able 
to distinguish what is ethical from what is unethical and act accordingly, regardless of the 
possible consequences.  
11.2 Business Law, Ethics and Communication 
 
11.2 Ethical Guidelines 
Many organizations have formed codes of ethics that identify specific acts (bribery, accepting 
gifts) as unethical and describe the standards employees are excepted to live up to. Over 90 
per cent of the Fortune 1,000 companies have ethics codes, as do many smaller business. 
These guidelines lessen the chance that an employee will knowingly or unknowingly violate a 
company’s standards. In addition, ethics codes strengthen a company’s hand in dealing with 
customers or prospects that encourage unethical behavior. For young or inexperienced 
executives, these codes can be valuable guides, helping them to resist pressure to promise 
personal ethics in order to move up in the firm. 
However, every decision cannot be taken out of the hands of the manager. Furthermore, determining 
what is right and what is wrong can be extremely difficult.  It is not realistic for an organization to 
construct a two-column list of all possible practices, on headed “ethical” and the other “unethical.” 
Rather, a marketer must be able to evaluate a situation and formulate a response.  
11.3 Behaving Ethically In Marketing 
Marketing executives should practice ethical behavior because it is morally correct. While 
this is simple and beautiful in concept, it is not sufficient motivation for everyone. So let’s 
consider four pragmatic reasons for ethical behavior: 
? To reverse declining public confidence in marketing. Periodically we hear about 
misleading package labels, false claims in ads, phony list prices, and infringements of 
well established trademarks. Though such practices are limited to only a small 
proportion of all marketing, the reputations of all marketers are damaged.  To reverse 
this situation, business leaders must demonstrate convincingly that they are aware of 
their ethical responsibility and will fulfill it.  Companies must set high ethical standards 
and enforce them.  Moreover, it is in management’s interest to be concerned with the 
well-being of consumers, since they are the lifeblood of a business.  
? To avoid increases in government regulation. Our economic freedoms sometimes have a 
high price, just as our political freedoms, do.  Business apathy, resistance, or token 
responses to unethical behavior simply increase the probability of more government 
regulation. Indeed, most of the governmental limitations on marketing are the result of 
management’s failure to live up to its ethical responsibilities at one time or other. Moreover, 
once some form of government control has been introduced, it is rarely removed. 
? To regain the power granted by society. Marketing executives wield a great deal of 
social power as they influence markets and speak out on economic issues. However, 
there is responsibility tied to that power. If marketers do not use their power in a socially 
acceptable manner, that power will be lost in the long run. 
? To protect the image of the organization. Buyers often form an impression of an entire 
organization based on their contact with one person. More often than not, that person 
represents the marketing function. You may base your opinion of a retail store on the behavior 
  Ethics in Marketing and Consumer Protection 11.3 
 
of a single sales clerk. As Procter & Gamble put it in an annual report: “When a Procter & 
Gamble sales person walks into a customer’s place of business that sales person not only 
represents Procter & Gamble, but in a very real sense, that person is Procter & Gamble.” 
11.4 Healthy Competition And Protecting Consumer’s Interest 
Competition – Challenges and Changes : Globalisation and progressive liberalization of trade 
during the last decade opened a widening atmosphere giving rise to certain inevitable tasks and 
challenges for every country around the globe. It therefore became imperative for many countries 
to have a new line of rethinking on the existing pattern of policies on trade, customs and usages. 
The World Trade Organisation’s (WTO) treaties and agreements, their implications on trade and 
commerce have already compelled many countries to review their competitiveness of trade and 
economic policies not only within their economy but across the frontiers of other countries also. In 
India, in the recent years, the corporate and economic reforms and policies had pervasive effects 
on the structure of domestic trade and competition. The law which was originally enacted to deal 
with market and competition (i.e., the Monopolies and Restrictive Trade Practices Act, 1969) 
addressed the problems concerning Monopolistic, Restrictive and Unfair Trade Practices only. 
There was no genesis to a comprehensive competition policy since then. Given the fact that the 
structure of world economy and trade has taken rapid strides and undergone vast changes, India 
has been taking adequate steps for integrating itself with the new changes and challenges thereby 
market functioning, positioning becomes effective and competitive. In this regard, Government 
constituted a High Level Committee on Competition Policy and Law on 15.10.1999 under the 
Chairmanship of Mr. S.V.S. Raghavan, to recommend a legislative framework relating to 
Competition Law including mergers and demergers. The Committee submitted its report on 22
nd
 
May 2000. The Government, after considering the report and suggestions from various 
organizations, institutions and general public, introduced the Competition Bill in the Parliament. 
This Bill became an Act after receiving assent from the President on 13
th
 January 2003 and a few 
sections of the Act have already come into force by virtue of two separate Government notifications 
[i.e., S.O.340 (E) dated 31
st
 March, 2003 and S.O.715 (E) dated 19
th
 June, 2003]. This Act extends 
to the whole of India except the State of Jammu and Kashmir.   
What is Competition? 
A broad definition of Competition is “a situation in a market in which firms or sellers independently 
strike for the buyers’ patronage in order to achieve a particular business objective, for example 
profit, sales or market share” (World Bank, 1999).  A pre-requisite for a good competition is trade, 
trade is the unrestricted liberty of every man to buy, sell and barter, when, where and how, of 
whom and to whom he pleases. For a free market to be in existence the handicap is that for a 
given distribution of income of those who can pay the highest price will most be able to purchase 
the goods regardless their relative needs. However, the real culprit is income distribution system 
and not the competitive system. In an unregulated free market, in certain circumstances it could 
be of greater benefit to the owner to withhold goods from market in order to extract a higher price. 
Despite the efforts to regulate prices which have been unsuccessful, the caution in a free market 
as compared to the problems in an unregulated market can be overcome by posturing 
11.4 Business Law, Ethics and Communication 
 
competition by which the ultimate raison de’ etre of competition, namely the, interest of the 
consumer can be protected. 
Competition Policy and Law: The Competition Policy is regarded as genus, of which, the 
Competition Law is specie. Competition Law provides necessary powers to the commission to 
enforce and implement the Competition Policy. The central economic goal of the Competition 
Policy is the preservation and promotion of the competitive process. It is a symbolic process, 
which encourages efficiency in the production and allocation of goods and services over a 
period of time through its effects on innovation and adjustment to technological change. In 
conditions of effective competition, competitors will be having equal opportunities to compete 
for their own economic interest and therefore the quality of their outputs and resource 
deployment will be given top priority in order to sustain and succeed in the market by meeting 
consumers’ demand at the lowest possible cost. 
Competition Laws in UK and US : There are three major federal anti-trust laws in United States 
namely the Sherman Anti-trust Act, the Clayton Act and the Federal Trade Commission Act. 
The Sherman Act passed in 1890 was the first Federal Anti-Trust Laws. The Act aimed at 
restraint of trade and monopolisation of Inter-State and Foreign Commerce.   
The Clayton Act is a civil statute (carrying no criminal penalties, was passed in 1914 and 
significantly amended in 1950). The Act is the result of failure of the Sherman Act to stop the 
trend towards concentration in the American economy. It attempts to nip monopolise in the 
bud by specifying practices that monopolists used to gain monopoly power. 
The Federal Trade Commission Act, 1914 prohibits unfair methods of competition in Inter-
State Commerce but carries no criminal penalties.  However, there was Federal Trade 
Commission to monitor violations of the Act.  Thus, in US basically anti-trust laws protect 
competition by ensuring free and open competition, which bring benefits to consumers by 
way of lower prices, new and better products.  
The UK Competition Act, 1988 which came into force in March 1, 2000 is based upon the 
Competition Law of the European Commission. The Act prohibited agreements, which have 
the object of preventing, restricting or distorting competition which directly or indirectly fix 
prices, trading conditions, limit or control production, markets or sources of supply.  
The Enterprise Act introduced the next major reform of UK Competition Law, 2002 which 
concentrated on a new regime for the assessment of mergers and markets in the UK. The 
third and final stage of reform process in the UK Competition Law will be the implementation 
of European Commission, which is a radical modernisation of UK’s Competition Policy. To 
regulate the competition and its practices, most of the countries have the competition 
authority commonly known as the Competition Commission. 
Competition Act, 2002: The Competition Act, 2002 intends to provide, keeping in view of the 
economic development of the country, for the establishment of a Commission to prevent 
practices having adverse effect on competition, to promote and sustain competition in 
markets, to protect the interests of consumers and to ensure freedom of trade carried on by 
Page 5


 
 
11 
Ethics in Marketing and Consumer 
Protection 
Learning Objectives 
? To know the ethical dilemmas in marketing 
? To understand the reasons for marketing ethical behaviour 
? To learn the initiatives taken in India towards promoting healthy competition 
? To know the distinction between protecting consumers interest and public interest 
? To know the initiatives taken by the United Nations towards Consumers Welfare 
Next to doing the right thing, the most important thing is to let people know you are doing the 
right thing.   
JOHN D. ROCKEFELLER 
11.1 Ethics and Marketing 
The task of marketers is to influence the behaviour of customers. To accomplish this goal, 
marketers have a variety of tools at their disposal. Broadly speaking, these tools include the 
design of a product, the price at which it is offered, the message used to describe it, and the 
place in which it is made available. 
Ethics are standards of moral conduct. To act in an ethical fashion is to conform to an 
accepted standard of moral behavior. Undoubtedly, virtually all people prefer to act ethically. 
It is easy to be ethical when no hardship is involved – when a person is winning and life is 
going well. The test comes when things are not going well – when pressures build. These 
pressures arise in all walks of life, and marketing is no exception. 
Marketing executives face the challenge of balancing their own best interests in the form of 
recognition, pay, and promotion, with the best interests of consumers, their organizations, 
and society into a workable guide for their daily activities. In any situation they must be able 
to distinguish what is ethical from what is unethical and act accordingly, regardless of the 
possible consequences.  
11.2 Business Law, Ethics and Communication 
 
11.2 Ethical Guidelines 
Many organizations have formed codes of ethics that identify specific acts (bribery, accepting 
gifts) as unethical and describe the standards employees are excepted to live up to. Over 90 
per cent of the Fortune 1,000 companies have ethics codes, as do many smaller business. 
These guidelines lessen the chance that an employee will knowingly or unknowingly violate a 
company’s standards. In addition, ethics codes strengthen a company’s hand in dealing with 
customers or prospects that encourage unethical behavior. For young or inexperienced 
executives, these codes can be valuable guides, helping them to resist pressure to promise 
personal ethics in order to move up in the firm. 
However, every decision cannot be taken out of the hands of the manager. Furthermore, determining 
what is right and what is wrong can be extremely difficult.  It is not realistic for an organization to 
construct a two-column list of all possible practices, on headed “ethical” and the other “unethical.” 
Rather, a marketer must be able to evaluate a situation and formulate a response.  
11.3 Behaving Ethically In Marketing 
Marketing executives should practice ethical behavior because it is morally correct. While 
this is simple and beautiful in concept, it is not sufficient motivation for everyone. So let’s 
consider four pragmatic reasons for ethical behavior: 
? To reverse declining public confidence in marketing. Periodically we hear about 
misleading package labels, false claims in ads, phony list prices, and infringements of 
well established trademarks. Though such practices are limited to only a small 
proportion of all marketing, the reputations of all marketers are damaged.  To reverse 
this situation, business leaders must demonstrate convincingly that they are aware of 
their ethical responsibility and will fulfill it.  Companies must set high ethical standards 
and enforce them.  Moreover, it is in management’s interest to be concerned with the 
well-being of consumers, since they are the lifeblood of a business.  
? To avoid increases in government regulation. Our economic freedoms sometimes have a 
high price, just as our political freedoms, do.  Business apathy, resistance, or token 
responses to unethical behavior simply increase the probability of more government 
regulation. Indeed, most of the governmental limitations on marketing are the result of 
management’s failure to live up to its ethical responsibilities at one time or other. Moreover, 
once some form of government control has been introduced, it is rarely removed. 
? To regain the power granted by society. Marketing executives wield a great deal of 
social power as they influence markets and speak out on economic issues. However, 
there is responsibility tied to that power. If marketers do not use their power in a socially 
acceptable manner, that power will be lost in the long run. 
? To protect the image of the organization. Buyers often form an impression of an entire 
organization based on their contact with one person. More often than not, that person 
represents the marketing function. You may base your opinion of a retail store on the behavior 
  Ethics in Marketing and Consumer Protection 11.3 
 
of a single sales clerk. As Procter & Gamble put it in an annual report: “When a Procter & 
Gamble sales person walks into a customer’s place of business that sales person not only 
represents Procter & Gamble, but in a very real sense, that person is Procter & Gamble.” 
11.4 Healthy Competition And Protecting Consumer’s Interest 
Competition – Challenges and Changes : Globalisation and progressive liberalization of trade 
during the last decade opened a widening atmosphere giving rise to certain inevitable tasks and 
challenges for every country around the globe. It therefore became imperative for many countries 
to have a new line of rethinking on the existing pattern of policies on trade, customs and usages. 
The World Trade Organisation’s (WTO) treaties and agreements, their implications on trade and 
commerce have already compelled many countries to review their competitiveness of trade and 
economic policies not only within their economy but across the frontiers of other countries also. In 
India, in the recent years, the corporate and economic reforms and policies had pervasive effects 
on the structure of domestic trade and competition. The law which was originally enacted to deal 
with market and competition (i.e., the Monopolies and Restrictive Trade Practices Act, 1969) 
addressed the problems concerning Monopolistic, Restrictive and Unfair Trade Practices only. 
There was no genesis to a comprehensive competition policy since then. Given the fact that the 
structure of world economy and trade has taken rapid strides and undergone vast changes, India 
has been taking adequate steps for integrating itself with the new changes and challenges thereby 
market functioning, positioning becomes effective and competitive. In this regard, Government 
constituted a High Level Committee on Competition Policy and Law on 15.10.1999 under the 
Chairmanship of Mr. S.V.S. Raghavan, to recommend a legislative framework relating to 
Competition Law including mergers and demergers. The Committee submitted its report on 22
nd
 
May 2000. The Government, after considering the report and suggestions from various 
organizations, institutions and general public, introduced the Competition Bill in the Parliament. 
This Bill became an Act after receiving assent from the President on 13
th
 January 2003 and a few 
sections of the Act have already come into force by virtue of two separate Government notifications 
[i.e., S.O.340 (E) dated 31
st
 March, 2003 and S.O.715 (E) dated 19
th
 June, 2003]. This Act extends 
to the whole of India except the State of Jammu and Kashmir.   
What is Competition? 
A broad definition of Competition is “a situation in a market in which firms or sellers independently 
strike for the buyers’ patronage in order to achieve a particular business objective, for example 
profit, sales or market share” (World Bank, 1999).  A pre-requisite for a good competition is trade, 
trade is the unrestricted liberty of every man to buy, sell and barter, when, where and how, of 
whom and to whom he pleases. For a free market to be in existence the handicap is that for a 
given distribution of income of those who can pay the highest price will most be able to purchase 
the goods regardless their relative needs. However, the real culprit is income distribution system 
and not the competitive system. In an unregulated free market, in certain circumstances it could 
be of greater benefit to the owner to withhold goods from market in order to extract a higher price. 
Despite the efforts to regulate prices which have been unsuccessful, the caution in a free market 
as compared to the problems in an unregulated market can be overcome by posturing 
11.4 Business Law, Ethics and Communication 
 
competition by which the ultimate raison de’ etre of competition, namely the, interest of the 
consumer can be protected. 
Competition Policy and Law: The Competition Policy is regarded as genus, of which, the 
Competition Law is specie. Competition Law provides necessary powers to the commission to 
enforce and implement the Competition Policy. The central economic goal of the Competition 
Policy is the preservation and promotion of the competitive process. It is a symbolic process, 
which encourages efficiency in the production and allocation of goods and services over a 
period of time through its effects on innovation and adjustment to technological change. In 
conditions of effective competition, competitors will be having equal opportunities to compete 
for their own economic interest and therefore the quality of their outputs and resource 
deployment will be given top priority in order to sustain and succeed in the market by meeting 
consumers’ demand at the lowest possible cost. 
Competition Laws in UK and US : There are three major federal anti-trust laws in United States 
namely the Sherman Anti-trust Act, the Clayton Act and the Federal Trade Commission Act. 
The Sherman Act passed in 1890 was the first Federal Anti-Trust Laws. The Act aimed at 
restraint of trade and monopolisation of Inter-State and Foreign Commerce.   
The Clayton Act is a civil statute (carrying no criminal penalties, was passed in 1914 and 
significantly amended in 1950). The Act is the result of failure of the Sherman Act to stop the 
trend towards concentration in the American economy. It attempts to nip monopolise in the 
bud by specifying practices that monopolists used to gain monopoly power. 
The Federal Trade Commission Act, 1914 prohibits unfair methods of competition in Inter-
State Commerce but carries no criminal penalties.  However, there was Federal Trade 
Commission to monitor violations of the Act.  Thus, in US basically anti-trust laws protect 
competition by ensuring free and open competition, which bring benefits to consumers by 
way of lower prices, new and better products.  
The UK Competition Act, 1988 which came into force in March 1, 2000 is based upon the 
Competition Law of the European Commission. The Act prohibited agreements, which have 
the object of preventing, restricting or distorting competition which directly or indirectly fix 
prices, trading conditions, limit or control production, markets or sources of supply.  
The Enterprise Act introduced the next major reform of UK Competition Law, 2002 which 
concentrated on a new regime for the assessment of mergers and markets in the UK. The 
third and final stage of reform process in the UK Competition Law will be the implementation 
of European Commission, which is a radical modernisation of UK’s Competition Policy. To 
regulate the competition and its practices, most of the countries have the competition 
authority commonly known as the Competition Commission. 
Competition Act, 2002: The Competition Act, 2002 intends to provide, keeping in view of the 
economic development of the country, for the establishment of a Commission to prevent 
practices having adverse effect on competition, to promote and sustain competition in 
markets, to protect the interests of consumers and to ensure freedom of trade carried on by 
  Ethics in Marketing and Consumer Protection 11.5 
 
other participants in markets, in India, and for matters connected therewith or incidental 
thereto. The renewed efforts of the Government in implementing a Competition Act, 2002 is a 
laudable step in the right direction and a new beginning in the frontiers of India’s Competition 
Policy towards harmonizing international trade and policy.  
Parameters of Competition Law 
? Prohibition of certain agreements, which are considered to be anti-competitive in 
nature. Such agreements [namely tie in arrangements, exclusive dealings (supply and 
distribution), refusal to deal and resale price maintenance] shall be presumed as anti-
competitive if they cause or likely to cause an appreciable adverse effect on competition 
within India. 
? Abuse of dominant position by imposing unfair or discriminatory conditions or limiting 
and restricting production of goods or services or indulging in practices resulting in 
denial of market excess or through in any other mode are prohibited.  
? Regulation of combinations which cause or likely to cause an appreciable adverse 
affect on competition within the relevant market in India is also considered to be void.  
Consumer - [Section 2(f), Competition Act, 2002] : "Consumer" means any person who— 
(i) buys any goods for a consideration which has been paid or promised or partly paid and 
partly promised, or under any system of deferred payment and includes any user of 
such goods other than the person who buys such goods for consideration paid or 
promised or partly paid or partly promised, or under any system of deferred payment 
when such use is made with the approval of such person, whether such purchase of 
goods is for resale or for any commercial purpose or for personal use; 
(ii) hires or avails of any services for a consideration which has been paid or promised or 
partly paid and partly promised, or under any system of deferred payment and includes 
any beneficiary of such services other than the person who hires or avails of the 
services for consideration paid or promised, or partly paid and partly promised, or under 
any system of deferred payment, when such services are availed of with the approval of 
the first-mentioned person whether such hiring or availing of services is for any 
commercial purpose or for personal use; 
It is noteworthy that the definition of consumer is substantially the same has given to the 
expression under Section 2(d) of the consumer protection Act, 1986. The difference is that 
under clause (i), in the Competition Act, it uses the words “whether such purchase of goods 
is for the resale of for any commercial purpose or for personal use” in places of the words 
“but does not include a person who obtains such goods for resale of for any commercial 
purpose”, as in the Consumer Protection Act.  Likewise, in clause (ii), the words used in the 
Competition Act are “whether such hiring or availing of services is for any commercial 
purpose or for personal use” in place of the words “but does not include a person who avails 
of such services for any commercial purpose” as in the Consumer Protection Act. Thus, the 
interpretation of “consumer” in the Consumer Protection Act will be the same as in