Introduction

Intelligence gathering is fraught with legal and ethical dilemmas; a shadow has been cast over the acquisition of competitive information since the Emperor Justinian sent monks on a clandestine mission to steal the secrets of silk making in the sixth century (Helms, Ettkin, & Morris, 2000, 94). Although intelligence gathering has evolved from military and political applications to corporate Competitive Intelligence (CI), it is still considered questionable, and with good reason. When Motorola’s intelligence team is headed by its third ex-CIA agent in a row (King Jr. & Bravin, 2000), it is natural for those outside the industry to perceive CI practices as dubious. Of course, the majority of CI is completely legal and ethical; but the small percentage of practices that straddle the line between legitimate information gathering and "spying" carry large consequences, as we are reminded whenever a breach of conduct comes to light in the press.
There are several areas where Competitive Intelligence strains the boundaries of legal and ethical guidelines, but the purpose of this paper is to explore in detail one of the most common concerns of CI practitioners: misrepresentation. Misrepresentation occurs whenever a CI practitioner lies or misleads a competitor about their identity in order to gain access to information; it is fraught with both legal and ethical problems.
First, I will define misrepresentation in terms of Competitive Intelligence practice, and discuss when it falls outside of U.S. legal guidelines. Then I will discuss differing points of view of misrepresentation within an ethical context.

Misrepresentation Defined

Much of competitive information can be found through public secondary sources; but there are times when it is beneficial to interview a competitor directly. Because a company may not willingly hand over information freely to a rival, there is a temptation to lie or mislead an interviewee about one’s identity or affiliation. Misrepresentation comes in two forms: 1) by commission, and 2) by omission. Misrepresentation by commission occurs whenever a CI practitioner intentionally uses subterfuge in order to gain information.  In 1997, Marc Barry was contracted by another CI professional to collect information about a new frozen pizza produced by DiGiorno. To gain the information, Barry posed as a potential supplier and entered into fictitious negotiations (Fitzpatrick, 2003,8). Other examples of misrepresentation my commission include posing as a student, market researcher, or even entering a rival’s retail shop as a customer.
Another form of misrepresentation is by omission, which consists not of blatantly lying, but rather failing to correct a mistaken assumption that the competitor has about one's identity or purpose. This kind of behavior is subtler, and more ambiguous. Treviño and Weaver recount an interview with an independent consultant, who described this kind of situation as follows: “Frankly, a lot of times they assume that my client is a _____company as opposed to a ______ company. I haven't told them that, and if they assume that, that's fine by me. It's not an act of commission, it's an act of omission” (Treviño & Weaver, 1997,64).
Acts of omission may also take place when one overhears a conversation concerning confidential information from a competitor, and the CI practitioner fails to identify herself as working with a rival company. Many conversations can be overheard in public places: a bar, hotel lobby, airport, or airplane. Any time a CI practitioner has the duty and opportunity to disclose his affiliation but purposefully fails to do so, this is misrepresentation by omission.
Another kind of misrepresentation by omission occurs when a CI practitioner honestly discloses his identity and affiliation, but obscures the real reason for the interview, such as saying that the information will be used for a broad market research study, for example (Treviño & Weaver, 1997, 64).
    

Legal Boundaries: the EEA

 “To my knowledge in all fifty states, it is not illegal to lie” (King Jr. & Bravin, 2000). This is a common myth that leads some to believe, while misrepresentation may present ethical problems, it is still within the law. But this is not entirely true. If a lie is 1) a misstatement of material fact, 2) known by the speaker to be false and intended to induce the receiver to rely upon it, and 3) was justifiably relied upon and caused the receiver to suffer actual damages, then it meets the legal definition of fraud (Ehrlich, 2006). Fraud has not only the risk of criminal law behind it; it runs the risk of civil law as well. The damages that a civil law suit can bring upon an individual or company are well-worth keeping in mind before relying upon the “lying isn’t illegal” adage.

Misrepresentation can also run afoul of the Economic Espionage Act of 1996 (EEA). The act is divided into two parts, the first of which concerns foreign powers and their agents seeking to steal trade secrets in order to benefit a foreign government, termed Economic Espionage (what we normally think of as traditional "spying"). The second part concerns individuals who steal trade secrets in order to "disadvantage the rightful owner of the trade secret and for the purpose of benefiting another person," termed Industrial or Corporate Espionage (Richardson & Luchsinger, 2007,44). This is the legal boundary that concerns most CI practitioners.
On the surface, the line between what is legal and illegal seems pretty clear. Corporate Espionage occurs whenever an individual or corporation "(1) steals, or without authorization appropriates, takes, carries away, or controls, or by fraud, artifice, or deception obtains such information; (2) without authorization copies, duplicates, sketches, draws, photographs, uploads, alters, destroys, photocopies, replicates, transmits, delivers, sends, mails, communicates, or conveys such information; [and] (3) receives, buys, or possesses such information, knowing the same to have been stolen or appropriated, obtained or converted without authorization..." (Fitzpatrick, 2003, 5)
The portion of the law that is applicable to the practice of misrepresentation is the words "fraud, artifice, or deception." Craig Ehrlich states it simply: "Lies that cheat people out of their money or property are usually frauds and the people who tell them are fraudsters. Confidential business information is property" (2006, 24). If confidential business information is property, than obtaining that information through misrepresentation is stealing. Corporations who violate the EEA are subject to a five million dollar fine, and individuals are subject to up to ten years imprisonment, and a $500,000 fine (Fitzpatrick, 2003, 5).
To date, prosecutions under the EEA have focused on individuals selling or otherwise illegally disseminating trade secrets, rather than the acquisition of them (Fitzpatrick, 2003, 8). But it is important for CI practitioners to know the letter of the law, and the potential risks it carries.
Ethical Boundaries
For some, knowing the legal boundaries might be enough; but for most, legal bounds are merely the outer limits of CI practice, and do not define the limits of acceptable behavior. In general, ethics is a subset of legal behavior, and the view of what is considered ethical changes from country to country, company to company, and person to person. One of the biggest issues in CI practice is the creation of an ethical code. First, I would like to address the issue of an ethical code as it relates to CI practices as a whole, and then discuss how different points of view on misrepresentation relate to an ethical code.

Reasons for an Ethical Code

Besides maintaining a clear conscience, an ethical code of conduct has several practical reasons. Treviño and weaver argue that encouraging ethical behavior is good for the CI profession as a whole. First, ethical lapses that come to light in the press damage an already tenuous reputation of CI practices in general. The word "intelligence" already connotes shady behavior- when ethical lapses show up on the front page it only serves to amplify this perception. Second, agreeing on a code of conduct will help CI practitioners respond to criticisms from outside the industry. When asked about a questionable practice in the industry that has made the press, for example, having a standard to turn to can help respond to criticism. Lastly, a set of standards is one of the hallmarks of a true profession (Treviño & Weaver, 1997). If CI practitioners want to raise the esteem of their profession, an ethical code is a step in the right direction.
In addition to supporting the CI profession, an ethical code is beneficial to corporations as well. Public lapses in ethical behavior that run counter to common culture result in damage to a company's reputation. In 2001, Proctor and Gamble suffered a blow when they were found to have violated ethical guidelines in order to obtain key strategic plans from a competitor (Vibert, 2004, 32). Proctor and Gamble has certainly learned from this experience. Today, in their Policy for Collecting Competitive Information, the first key principle is "No competitive information is worth Jeopardizing Proctor & Gamble's reputation or your own" (Proctor & Gamble, 2006, 141).

The Ethics of Misrepresentation: Differing Views

SCIP

The Society of Competitive Intelligence Professionals (SCIP) is an industry leader in providing legal and ethical guidance to CI practitioners, and takes the high road in terms of its stance on misrepresentation. The SCIP code of ethics encourages intelligence professionals to "accurately disclose all relevant information, including one's identity and organization, prior to all interviews" (SCIP Code of Ethics, 2007). Most companies that publish ethics policies are consistent with this stance: "Almost all codes of CI ethics include a very clear statement that any individual involved in the CI activity must not pretend when they talk to outside sources in any public venue. Corporate codes differ to the degree to which this information is volunteered, buy all flatly state that you must truthfully answer the question when asked" (Hohhof, 2006, 73).

Common Views

Treviño and Weaver found that among their survey of CI practitioners, misrepresentation by commission was consistently frowned upon, but acts of omission were given more latitude. Most CI practitioners, were they to overhear information that is obviously meant to be confidential, would identify themselves as a competitor. If the conversation continues, then due diligence has been followed, and any further information is fair game. (Treviño & Weaver, 1997, 65). The guiding principle seemed to be intent to deceive. If information is received without overt deceit, then there are fewer scruples about keeping or using such information. There is also more latitude given in misrepresenting one’s identity if the information being sought is in the public domain. For example, a company might be less likely to share information about prices or products to a rival, even though the information does not constitute a trade secret. CI practitioners are more likely to justify pretending to be a customer, for example, in order to receive cooperation, as long as the information is freely available to customers (Shing & Spence, 2002, 350).

Shing/Spence

Shing and Spence maintain that any misrepresentation is unethical, no matter how small. They consider the practice of "mystery shopping," in which employees or students are recruited to pose as customers in a retail shop in order to obtain information about the competitor's product, as inherently unethical. Sales information, they claim, is not clearly in the sphere of the public domain; retailers are free to withhold information to those they choose, and they may not willingly choose to disclose sales information to a known competitor. Any documents received in this context are received under false pretenses, and the deception inherent in the practice makes it an unacceptable according to SCIP guidelines (2002, 352).

Weiss

An ethical code that supports honesty in all cases sounds ideal. But how easy is it to walk the walk, so to speak? Is it fair to expect business practices to hold stringent moral codes if they stifle business? If "mystery shopping" is unethical, as Shing and Spence claim, where do we draw the line? Weiss claims that if the SCIP code were "...followed through to its logical conclusion, virtually all primary research could be viewed as unethical. Even visiting a competitor's exhibition stand and picking up brochures, or attending a business seminar where the competitor was speaking could be viewed s suspect. The trouble with this view is that the only legitimate form of competitor research would involve secondary sources" (Weiss, 2006, 38). Moreover, Weiss claims that if companies are prevented from learning about each other, it will be difficult for them to distinguish themselves adequately from competitors, and would fail to meet the needs of customers (2006, 39). Intelligence sharing, then, ultimately benefits the marketplace, and consumers.

Collins/Schultz

Intelligence sharing is ultimately beneficial; and yet, it is in every company's interest to protect intellectual property, which provides a barrier to the dissemination of information. Does this justify lying by CI professionals? Collins and Schultz maintain that it does. The bottom line, they claim, is still the driving factor in corporate policy. Short of expecting anyone to violate her own ethics, misrepresentation is fair game. "We believe that, lacking any legitimate expectation on the part of the receiver of the message, there is no duty or obligation on the part of the sender to be truthful. We also believe that the primary duty to keep a secret falls on the owner of the secret and not on the person who is attempting to gain the knowledge. Such is the nature of the business realm, and all who work within this sphere of activity should be constantly aware of these expectations" (Collins & Schultz, 1996, 65). This runs contrary to the ethics pervasive in CI literature. But one has to wonder to what extent it describes the day-to-day climate in the corporate environment.

International Issues

Globalization has compounded the complexity of ethics issues in Competitive Intelligence; for while there is plenty of debate among CI practitioners in the U.S., there is a difference in attitudes toward misrepresentation across the Atlantic as well.  A study that compared views of questionable ethical practices between CI practitioners in the U.S. and Europe found quite a large divide between how each set of intelligence professionals viewed misrepresentation. More than half of the Europeans viewed taking off a badge at a trade show and approaching a competitor's booth as normal, while only ten percent of North Americans thought so. When asked about entering a competitor's suite (again without badges) marked "For Clients of Company X Only," less than ten percent of Europeans viewed the practice as illegal. By contrast, half of the North Americans viewed it as illegal (Fuld, 2006). This makes things complicated for those working overseas for a U.S. company; for while the cultural ethics of the foreign country might be different, an employee of a U.S. company is beholden to put U.S. law and ethical standards as their priority.

Misinformation Doesn’t Pay

Ironically, Lying in order to get information isn't as efficient as some would think. A three-year study conducted by Primary Intelligence revealed a direct correlation between upfront honesty in an interview, and cooperation from the interviewees. Those who chose to completely disclose their company and sponsor up front received an 85% cooperation rate. Those who misrepresented themselves only received 12% cooperation (Jensen, 2006). Of course, the study didn't take into account the type of information the interviewers were trying to get; however, this is a good antidote to the fallacy that searching for information on competitors necessarily requires unethical activity.

Conclusion

Misrepresentation is anything but clear-cut; the ethical and legal boundaries are nebulous at best, and fraught with legal and civil liability at worst. Having examined the issue from different viewpoints, one thing is clear: codified guidelines of behavior are a must. The ethics of misrepresentation can be debated philosophically, but the ethical and legal guidelines are a practical necessity. While guidance from the SCIP may be too ideal for some, they at least provide a frame of reference to discuss and create particular corporate policies. The government's role in regulating competitive Intelligence practice is limited; it is only an arbiter for those who believe the have suffered tangible harm through theft of trade secrets. The responsibility for ethical behavior rests upon corporations and individual; for ethics is a matter of culture, and breaches of ethics hold company and individual reputations at stake.

Making ethical decisions is a matter of balance; the company must weigh its policy with the ethical culture and legal requirements of the country in which it resides on the one hand, and the need to retain a competitive edge on the other. Individuals must balance their company's policy with their own conscience. Knowing the law and industry guidelines help one to use good judgment in every day decisions. Ethical behavior will also maintain the esteem of the Competitive Intelligence profession, and help it move beyond its checkered past.




 
References
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