Contemporary legal environment in the United States allows people to use the court system to gain personal benefits while filing fake law suits, in which people attempts to gain money from the other party for no cause at all. This is especially relevant to the marketing services industry, where suing can work both ways – buyers and sellers alike may claim false damages in order to earn money. Caveat emptor -- let the buyer beware -- points to an expectation of deceit or unfair dealing inherent in the treatment of the buyer by the seller. However, David Ogilvy, a noted advertising executive, proclaims that caveat emptor has given way to caveat vendor -- let the seller beware -- because of zealous regulation of marketing activities. (Bai 31) What both caveats ignore is that buying and selling are merely part of the process of marketing that, in and of itself, is not deceptive or unfair to either party. Ogilvy states, "Advertising is only evil when it advertises evil things." (Bai 31) Marketing, of which advertising is a single element, is a complex process that includes a number of related functions from a product or service's production to its ultimate receipt and consumption by a customer. Throughout the steps from production to consumption the marketing process itself functions the same regardless of the product -and whether deceptive practices considered as fraud are involved. Thus, recognizing fraud in marketing is difficult because it can occur throughout or at any point during the marketing process -- or by any of the individuals or entities involved in the process. The customer, indeed, may have been defrauded, but by whom and at what point? If a customer is sold an intentionally defective toy does the fraud lie with the manufacturer who provided the plastic with which the toy was formed, the company that assembled the toy, the distributor of the finished toys, or the store that sold the toy?
One or more parties may perpetrate the fraud, one or more may have knowledge of or be in a position to prevent the fraud, and all may bear some responsibility depending on their relationship to the fraudulent activity. (Henderson 90) Interestingly, Phillip Davis claims that many corporate frauds are unplanned and, initially, are not the product of criminal intent. (Comer 54) What begins as a managerial indiscretion or expediency can develop into greater frauds because the average business person fails to recognize the ramifications of that conduct. While some fraud can even be attributed to mismanagement Davis suggests that today's business environment largely tolerates fraudulent and unethical behavior and accepts the risk of punishment rather than facing the cost of eliminating fraud. (Comer 56) Various legal statutes and judicial opinions exist that apply to fraudulent and unfair marketing activities. An activity itself may not be fraudulent in a civil or criminal sense although it may generally be considered unethical according to some professional standard or immoral in society's view. Political marketing is widely considered dirty, dishonest, and misleading; yet the various federal regulatory agencies that oversee advertising have no jurisdiction over political messages, which are considered protected speech under the First Amendment to the United States Constitution. (Henderson 94) Therefore, what the public may decry as fraud might be technically a legal, albeit unethical or questionable, practice.
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The researchers provide some illustrations of fraud in marketing: misrepresentation of product value, overblown comparisons of value between competitive products, lying or omitting information related to the condition of a product, overstating the performance of a product or its ability to meet customer needs, unfair pricing, and false advertising. (Swope 82) These examples focus on the sale, pricing, and promotion of products or services. Determining fraud in any of these areas is subjective and often depends on the competency of the customer or whether duress or undue influence is involved. A customer of reasonable intelligence is expected to know the difference between deceptive claims of value and the seller's opinion or if the price is unreasonably high. Those differences may require legal interpretation as to whether a seller's exaggerated statements of opinion -- a marketing practice known as "puffing" -- are innocent promotions or fraudulent misrepresentations. In addition to fraudulent sales, pricing practices, and misrepresentations in promotional content the researchers discuss other corporate frauds that occur in the marketing process. (Comer 70) Involving competitors rather than consumers, these are frauds which can be categorized as industrial espionage. This competitive type of fraud includes acquisition under false pretenses or theft of customer lists, product development information, marketing plans, technology, trade secrets, patents, or copyrights as well as predatory sales practices, commercial slander, and corruption of customer relationships. (Comer 72) These activities center on obtaining information and spreading disinformation in order to enhance one's competitive advantage or to disrupt the competitive standing of one's competition. In these frauds the perpetrator may seek product or client information in order to benefit unfairly from opportunities identified from another's research efforts. Additionally, while misrepresentations may not be made about one's own product, fraudulent information may be aimed at reducing the consumer's preference for another product. Based on such misinformation the customer may be led to purchase the fraudulent marketer's product or service instead of one which would have been judged more desirable had an accurate comparison been made. Unaware of the deception the customer may remain satisfied with the purchase. Therefore, unlike fraudulent misrepresentations where the customer-victim knows the product does not meet expectations, competitive fraud may go unnoticed. The courts act on an allegation of fraud through application of judicial and statutory measures to subjective marketing activities. In civil actions the court will apply a rule of fairness or fair dealing that examines whether the seller had superior knowledge or undue advantage in the sales transaction and, therefore, a responsibility to disclose such information to the buyer. (Henderson 101) A court, using the Supreme Court's definition of fraud, will attempt to establish whether an intentional misrepresentation of fact had occurred during a marketing exchange. Thus, fraud may result from an intentional omission of information as well as deception.
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