There are a number of sales practices that are illegal for businesses to engage in when dealing with their customers. The Australian Consumer Law makes it illegal for a business to persuade a consumer to buy goods or services by promising benefits if they help the business supply goods or services to other customers. It is illegal to participate in, or to persuade someone to participate in, a pyramid scheme. Pyramid schemes make money by recruiting people rather than by selling actual products or services, even if the scheme includes the selling of a product. These schemes work by asking new participants to make a payment, known as a ‘participant payment’, in order to join. New members are promised payments for recruiting other investors or new participants. There are laws protecting consumers from unfair terms in circumstances where they have little or no opportunity to negotiate with the business, such as standard from contracts. Most terms in standard form consumer contracts are covered by unfair contract terms law. However, terms in consumer contracts that set the price or define the product or service being supplied are exempt. The fairness of a term must be considered in the context of the contract as a whole. A finding by a court that a contract term is unfair, and therefore void, means that the term is treated as if it never existed. However, the contract will continue to bind the affected parties to the extent that the contract is capable of operating without the unfair terms. The following questions can help you recognise a potentially unfair term:
Businesses are prohibited from acting in an unconscionable manner against their customers and against other businesses. That sort of behaviour is known as unconscionable conduct. Certain conduct may be unconscionable if it is particularly harsh or oppressive or where one party knowingly exploits the special disadvantage of another. Unconscionable conduct is more than just hard commercial bargaining; it must be against conscience as judged against the norms of society. The law sets out a list of factors that courts may consider when deciding whether conduct is unconscionable, including:
You must not accept payment for goods or services if:
This part of the law is not intended to affect businesses who genuinely try to meet supply agreements, for example, if:
In essence, a kickback is a bribe. It's a way of paying money to get somebody to keep doing business with you. From a basic standpoint, you shouldn't have to do that. If you have the best product, you shouldn't have to pay people to buy it. So, that's a problem with kickbacks, Around that same idea, kickbacks are not only unethical (which they very much are), they're also illegal. Engaging in anything that's unethical or illegal is a bad idea, as these things can come with consequences. Lastly, the big impact of kickbacks is that it results in unfair competition. Plus it creates distortions in the market. Plus, the cost of kickbacks is often passed on to customers through the cost of the product. Further, the customer had no choice in the matter with regard to paying a higher price for an inferior product. Related Topics
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A kickback is an illegal payment intended as compensation for preferential treatment or any other type of improper services received. The kickback may be money, a gift, credit, or anything of value. Paying or receiving kickbacks is a corrupt practice that interferes with an employee's or a public official’s ability to make unbiased decisions. Kickbacks are often referred to as a type of bribery.
While kickbacks can take many different forms, they all feature some sort of collusion between two parties. For example, the bookkeeper for a business or government office might approve an invoice for goods, knowing that the bill is inflated. The seller of the goods might then pay the bookkeeper part of the difference (or some other kind of reward). Kickback schemes are among the most difficult white-collar crimes to detect and investigate. Kickbacks can also be used to buy a positive recommendation for the kickback provider. For example, a government employee responsible for managing contractors on an infrastructure project–such as the building of a bridge–might receive a kickback for choosing one contractor over another. This may result in a better-qualified contractor not winning the bid. Procurement contracts can be fertile ground for kickback schemes. For example, in the granting of a government contract for office equipment, contractors interested in winning the business are typically required to bid against each other. Rather than playing fair, a contractor might reach out to a procurement officer and indicate that, if the contractor were to win, the officer would be rewarded. The reward might be cash, concert tickets, etc. These are some common kickback warning signs. They don't necessarily mean that anything nefarious is going on, but the more of them there are, the greater the likelihood of a kickback scheme.
Kickbacks increase the cost of doing business in countries around the world; they also form the basis for much of the world's government corruption. Companies looking to supply products or services to countries known for corruption may find that they have to pay numerous officials in order to be considered for a contract. The perception that a kickback scheme will go unpunished—or that punishment will be light—is a primary driver for officials willing to take bribes. In some cases, they may be poorly paid and see kickbacks as a way to supplement a meager salary. Even if it is the local custom, the U.S. Foreign Corrupt Practices Act makes bribing foreign officials illegal for all companies listed with the Securities and Exchange Commission (SEC), any company organized in the United States, or any citizen or resident. On Wall Street, brokers sometimes route all orders to a particular exchange (even though they are required by law to execute trades with the one that offers the best terms, or best-execution, for their clients). Rather than choosing the exchange that offers the most competitive price and has the highest likelihood of completing the trade in a timely manner, the broker may take a kickback in exchange for routing all of their trades to that particular exchange. This can ultimately lead to slower execution and higher transaction costs for clients. The industry refers to the practice as "rebates." While rebates may amount to only a fraction of a cent of each share traded, over time, considerable sums can be accrued. In the advertising business, kickbacks can take the form of rebates or fraudulent billing for nonexistent services. Clients pay the price with higher costs or a lower level of service than they normally would expect for their money. Shrinking agency fees and a hard-to-understand digital marketplace are providing the motivation and cover for such actions. |
What are kickbacks and why was their usage detrimental to the community at large
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