Business Ethics Case Study: Orkin Extermination
Case Summary:
Between 1966 and 1975, Orkin Exterminating Company contracted with their customers a “lifetime” termite protection control if the contracted customers continue to pay the annual renewal fee. But, this contract became too expensive for Orkin when US suffered price inflation. It decided to increase annual renewal fee by 40 Percent. Few persistent customers were able to escape the rate increase through an accommodation plan, while most customers were not informed about this possibility.
Ethical and Legal Implication of Orkin’s Behavior
Ethical Dilemma:
Is it Ethical for Orkin to increase the price, while the customers have been paying the annual renewal fee regularly as per the contractual agreement in return for Orkin to provide lifetime termite protection control?
Unless there is a 100 percent increase in cost, it is unethical if Orkin increases the price for reasons such as ‘profit is lesser after cost increase’. However, it might be ethical in very few cases where they suffer loss. And committed contracted service is impractical to meet anymore. In such cases, Orkin could reconsider and attempt to negotiate a new contract explaining the changed situation to all the affected customers.
Is it appropriate to conceal and not inform about the accommodation plan to all the customers equally?
No, it is NEVER ethical to conceal facts that benefit only few customers while most other customers are affected. All customers must to be treated equally and there should not be any bias in the decisions or consideration.
Is it fair allowing few customers to escape the price increase while most of them were affected?
It is not a mistake on the customers who made their way out escaping the price. However, it is not ethical on the part of Orkin not informing about the same ‘accommodation plan’ to all the customers who entered the lifetime contract during 1966-1975.
Legal Implication:
I have highlighted various angles of legal issues with specific
Between 1966 and 1975, Orkin Exterminating Company contracted with their customers a “lifetime” termite protection control if the contracted customers continue to pay the annual renewal fee. But, this contract became too expensive for Orkin when US suffered price inflation. It decided to increase annual renewal fee by 40 Percent. Few persistent customers were able to escape the rate increase through an accommodation plan, while most customers were not informed about this possibility.
Ethical and Legal Implication of Orkin’s Behavior
Ethical Dilemma:
Is it Ethical for Orkin to increase the price, while the customers have been paying the annual renewal fee regularly as per the contractual agreement in return for Orkin to provide lifetime termite protection control?
Unless there is a 100 percent increase in cost, it is unethical if Orkin increases the price for reasons such as ‘profit is lesser after cost increase’. However, it might be ethical in very few cases where they suffer loss. And committed contracted service is impractical to meet anymore. In such cases, Orkin could reconsider and attempt to negotiate a new contract explaining the changed situation to all the affected customers.
Is it appropriate to conceal and not inform about the accommodation plan to all the customers equally?
No, it is NEVER ethical to conceal facts that benefit only few customers while most other customers are affected. All customers must to be treated equally and there should not be any bias in the decisions or consideration.
Is it fair allowing few customers to escape the price increase while most of them were affected?
It is not a mistake on the customers who made their way out escaping the price. However, it is not ethical on the part of Orkin not informing about the same ‘accommodation plan’ to all the customers who entered the lifetime contract during 1966-1975.
Legal Implication:
I have highlighted various angles of legal issues with specific