Ethical Issues in Marketing, Sales & IT: Cases, Codes & Consequences

Core Concepts

1. Ethical Issues in Marketing

Marketing ethics involves principles that guide fair and honest promotion of products/services. Key ethical issues include:

A. Deceptive Advertising

• Definition: Misleading consumers through false claims, hidden fees, or exaggerated benefits.
• Examples:
  • eSewa: Some third-party service providers misrepresent transaction fees or service quality.
  • Daraz: False discounts (e.g., "50% off" when original price was inflated).

B. Greenwashing

• Definition: False or misleading claims about environmental benefits.
• Example:
  • A Nepali tea brand advertising "100% organic" without certification.

C. Targeting Vulnerable Groups

• Example:
  • Ncell: Aggressive upselling of expensive data plans to low-income users.

D. Privacy Violations in Digital Marketing

• Example:
  • Facebook (Meta): Unauthorized use of user data for targeted ads (Cambridge Analytica scandal).

2. Ethical Issues in Sales

Sales ethics ensures fair treatment of customers and integrity in transactions.

A. High-Pressure Selling

• Definition: Coercing customers into purchases they don’t need.
• Example:
  • Pathao: Drivers pushing unnecessary add-ons (e.g., "insurance" for rides).

B. Conflict of Interest

• Definition: Prioritizing personal gain over customer welfare.
• Example:
  • A Nabil Bank loan officer recommending high-interest loans for personal commissions.

C. Bait-and-Switch

• Definition: Luring customers with advertised deals but pushing inferior alternatives.
• Example:
  • A Kathmandu electronics shop advertising a smartphone at a low price but claiming it’s "out of stock" and selling a pricier model.

D. False Scarcity

• Definition: Creating artificial urgency (e.g., "Only 3 left!").
• Example:
  • Daraz: Fake stock alerts to rush buyers.

MERMAID DIAGRAM: Sales Ethics Violation Flowchart

flowchart TD
    A["High-Pressure Selling"] --> B["Customer Distrust"]
    B --> C["Lost Sales"]
    C --> D["Regulatory Action"]

    E["Conflict of Interest"] --> F["Legal Penalties"]
    F --> G["Reputation Damage"]

    H["Bait-and-Switch"] --> I["Consumer Complaints"]
    I --> J["Brand Boycott"]

3. Ethical Issues in IT

IT ethics focuses on data security, transparency, and responsible technology use.

A. Data Privacy Breaches

• Definition: Unauthorized access or misuse of user data.
• Example:
  • eSewa: Leakage of transaction records due to poor encryption.

B. Cybersecurity Risks

• Definition: Exploiting vulnerabilities for financial gain.
• Example:
  • Nepal Rastra Bank: Phishing attacks targeting bank customers.

C. AI and Algorithmic Bias

• Definition: Discriminatory outcomes from biased AI models.
• Example:
  • Google Ads: Targeting ads based on sensitive attributes (e.g., gender, age) without consent.

D. Intellectual Property Theft

• Definition: Unauthorized use of software, patents, or copyrighted content.
• Example:
  • Nepali software developers selling pirated versions of Adobe Photoshop.

In the Real World

1. eSewa’s Ethical Dilemma

   • Issue: Third-party service providers on eSewa sometimes charge hidden fees.
   • Ethical Concern: Transparency in pricing (violates FNCCI’s Business Code of Conduct, 2061).
   • Solution: eSewa now mandates upfront fee disclosure.

2. Daraz’s Fake Discounts

   • Issue: Some sellers inflate original prices to show "50% off" deals.
   • Ethical Concern: Misleading consumers (violates Consumer Protection Act, 2075).
   • Impact: Led to FDC investigations in 2023.

3. WhatsApp’s Data Sharing Controversy

   • Issue: WhatsApp’s 2021 privacy policy update allowed sharing user data with Facebook.
   • Ethical Concern: Lack of informed consent (violates GDPR in Europe).
   • Outcome: Global backlash forced policy revisions.

4. Ncell’s Predatory Loans

   • Issue: Selling expensive mobile financial services to rural users with low digital literacy.
   • Ethical Concern: Exploiting vulnerability (conflict with Nepal Bankers’ Association Code).
   • Regulatory Response: NBR imposed stricter disclosure rules.

Key Ethical Frameworks Applied to Business Functions

Case Study: Himalayan Java’s Ethical Marketing

Scenario: Himalayan Java, a Nepali coffee brand, was accused of:

1. False organic claims (no certification).
2. Exploitative labor practices (low wages for farmers).

Ethical Analysis:

• Utilitarian View: Short-term profit vs. long-term brand damage.
• Stakeholder Theory: Impact on farmers, consumers, and investors.
• Outcome: After public backlash, they obtained organic certification and partnered with Fair Trade Nepal.

MERMAID DIAGRAM: Himalayan Java’s Ethical Decision-Making

mindmap
  root((Himalayan Java Case))
    False Claims
      Greenwashing
      No Certification
    Labor Exploitation
      Low Farmer Wages
      No Fair Trade Compliance
    Stakeholder Impact
      Consumers: Distrust
      Farmers: Poverty
      Investors: Risk
    Ethical Response
      Obtained Organic Certification
      Partnered with Fair Trade Nepal
      Transparent Supply Chain

Ethical Decision-Making Models

1. Normative Ethical Frameworks

2. Ethical Decision-Making Steps

flowchart TD
    A["Identify the Issue"] --> B["Gather Facts"]
    B --> C["Define Stakeholders"]
    C --> D["Explore Alternatives"]
    D --> E["Evaluate Ethics"]
    E --> F["Make Decision"]
    F --> G["Monitor & Review"]

Worked Example: eSewa’s Fee Disclosure Policy

1. Issue: Hidden transaction fees by third parties.
2. Stakeholders: Users, eSewa, service providers.
3. Alternative: Mandate upfront fee display.
4. Ethical Test:
   • Utilitarian: Reduces user frustration.
   • Deontological: Aligns with transparency duty.
5. Outcome: eSewa now enforces real-time fee visibility.

Consequences of Unethical Practices

Real-World Example: Facebook-Cambridge Analytica Scandal

• Action: Unauthorized data sharing.
• Short-Term: Targeted ads boosted engagement.
• Long-Term: $5B fine, GDPR violations, user exodus.

Exam Tip

How to Score Full Marks

1. Case Analysis (30-40%)

   • Structure: Issue → Stakeholders → Ethical Theory → Solution.
   • Example:

     "In the Mid-Hill Highway Project case, the ethical issue was bribery in contractor selection. Using Kantian Ethics, the duty to act impartially was violated. The FNCCI Code mandates transparent tendering, so the solution was to audit all contracts."

2. Comparison Tables (20%)

   • Always use 2-3 columns (e.g., Marketing vs. Sales ethics).
   • Example:

     Aspect	Marketing Ethics	Sales Ethics
     Key Concern	Truth in advertising	Fair treatment of customers
     Nepali Law	Consumer Protection Act	Trade Practices Act

3. Theory Application (20%)

   • Link real cases to ethical theories.
   • Example:

     "Pathao’s upselling violates Rights Theory because it denies customers the right to informed choice."

4. Regulatory References (15%)

   • Always cite:
     • FNCCI Business Code of Conduct, 2061
     • Consumer Protection Act, 2075
     • Nepal Rastra Bank Guidelines

5. Diagrams (15%)

   • Mermaid flowcharts for decision-making models.
   • Tables for comparisons (e.g., ethical issues by function).

Pro Tip: For short-answer questions (e.g., "Define business code of conduct"), use the FNCCI definition:

"A set of principles and rules governing ethical behavior in business, ensuring compliance with laws, stakeholder rights, and corporate values."