CSA Sales Ethics and Compliance 3 — Questions and Answers
Question 1: A customer signs a sales contract but later claims they were pressured and did not fully understand the terms. Under consumer protection law, what right may protect this customer?
- The Right of First Refusal
- The Right of Rescission (Correct answer)
- The Right of Subrogation
- The Right of Indemnification
Correct answer: The Right of Rescission
The Right of Rescission allows consumers a cooling-off period (typically 3 business days) to cancel certain contracts signed under pressure or in their home.
Question 2: When a salesperson omits a material fact that would likely influence a buyer's decision, this is known as:
- Puffery
- Fraudulent misrepresentation by omission (Correct answer)
- Caveat emptor
- Contributory negligence
Correct answer: Fraudulent misrepresentation by omission
Withholding a material fact that the buyer would consider important in making their decision constitutes fraudulent misrepresentation by omission.
Question 3: The Robinson-Patman Act primarily prohibits which type of unethical sales practice?
- False advertising in print media
- Price discrimination that harms competition between buyers (Correct answer)
- Unauthorized recording of sales calls
- Pyramid scheme compensation structures
Correct answer: Price discrimination that harms competition between buyers
The Robinson-Patman Act prohibits sellers from charging different prices to competing buyers for the same product when it harms competition.
Question 4: A sales manager instructs reps to tell customers a product is 'FDA approved' when it has only received FDA clearance. What type of violation is this?
- A minor technical distinction with no legal consequence
- A deceptive claim that may violate FTC regulations and misrepresent the product (Correct answer)
- An acceptable simplification for consumer communication
- A permissible use of puffery in advertising
Correct answer: A deceptive claim that may violate FTC regulations and misrepresent the product
FDA approval and FDA clearance are legally distinct designations; misrepresenting clearance as approval is a deceptive claim that can violate FTC rules.
Question 5: An employee suspects their company is engaged in bid rigging with competitors. The most appropriate first step is to:
- Participate in the bid process as instructed to avoid conflict
- Report concerns through the company's compliance hotline or to legal counsel (Correct answer)
- Inform a competitor that you suspect bid rigging
- Withdraw from all future bids without explanation
Correct answer: Report concerns through the company's compliance hotline or to legal counsel
Bid rigging is a serious antitrust violation; employees should report suspicions through internal compliance channels or seek legal guidance.
Question 6: Which of the following best defines 'puffery' in a sales context?
- Illegal exaggeration of product capabilities with measurable claims
- Subjective promotional statements that reasonable consumers do not take as fact (Correct answer)
- Overpromising delivery timelines to close a deal
- Inflating inventory counts in reporting
Correct answer: Subjective promotional statements that reasonable consumers do not take as fact
Puffery refers to vague, subjective boasts like 'the best in the world' that are not taken as literal factual claims by reasonable consumers.
Question 7: A customer purchases a product using a financing plan with a deferred interest clause. The salesperson fails to explain this clause. Which law is most likely violated?
- The Sherman Antitrust Act
- The Truth in Lending Act (TILA) (Correct answer)
- The Fair Debt Collection Practices Act
- The Magnuson-Moss Warranty Act
Correct answer: The Truth in Lending Act (TILA)
TILA requires clear disclosure of all credit terms including deferred interest provisions before a consumer enters a credit agreement.
CSA Sales Ethics and Compliance 3
A customer signs a sales contract but later claims they were pressured and did not fully understand the terms.
Under consumer protection law, what right may protect this customer?