What are some of the legal and ethical issues involved in collecting competitor

Question

What are some of the legal and ethical issues involved in collecting competitor intelligence in the following situations?

a. Hotel A sends an employee posing as a potential client to Hotel B to find out who Hotel B’s major corporate customers are.

b. A firm hires an MBA student to collect information directly from a competitor while claiming the information is for a course project.

c. A firm advertises a nonexistent position and interviews a rival’s employees with the intention of obtaining competitor information.

Explanation / Answer

Competitive intelligence is ethical and legal when practised appropriately. Especially when the information collected is from public or subscribed sources, one does not need to have a second thought.

However, there are a few methods to totally refrain from as they are considered illegal or unethical.

Competitive intelligence is often mixed up with industrial espionage - Which is illegal.

Legalities mostly depend on the laws adopted by the region/state/jurisdiction. However ethical issues are not necessarily part of any law but are a part and parcel of companies policies, values and social regulations. One must consult their legal department to understand what is acceptable under competitor intelligence.

The three sub-points given in the question are unethical and illegal since it comes under the bucket of Misrepresentation. In all of the three situations, the individual is disguising as someone else to deceive the competitor with their fake identity.

a. Misrepresentation - unethical.

b. Misrepresentation - unethical - Illegal and unacceptable as per most companies policies.

c. Misrepresentation - Ethically very incorrect, even if the company is actually hiring with an open position, the candidates applying for the job must adhere to their previous companies non-disclosure agreement, violating which could lead to penalties.

Ethical issues may lead to loss of goodwill and business opportunities. When one is misrepresenting their identity and finding out trade secrets of the competitor, it is a punishable act under the  Economic Espionage Act of 1996. Trade secrets could include any practice/design etc. that the competitor did not want to disclose to the public. If the competitor intended to keep any of their business practices/engineering/designs as a secret and one tries to steal it, it is illegal.

Violating this could lead to penalties or even imprisonment. There are several other laws governing such issues. One example could be the laws governing the IPR - Intellectual property rights.

You may refer to the following link for more examples of corporate Espionage: www.bloomberg.com/news/photo-essays/2011-09-20/famous-cases-of-corporate-espionage

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