2.0 Your Relationship with Commercial Customers and Suppliers
Sun's success is directly related to our ability to maintain strong business relationships with our customers and suppliers. Those who deal with Sun must be confident of our commitment to fairness and integrity. This commitment requires that all Sun employees know Sun's policies governing these relationships.
2.1 Payments and Gratuities
It is sometimes customary for persons or companies doing business with each other to exchange gifts or pay for one another's meals. For example, execution of a contract might be celebrated by a dinner or an exchange of advertising novelties bearing company logos. The appropriateness of exchanging such gratuities will depend on the circumstances. In general, it is permissible to accept or provide a token gift or meal if the following criteria are met:
- The gratuity is of customary value, as determined by industry practices (so it is not construed as a bribe or kickback).
- The gratuity is for the purpose of promoting goodwill and is not intended to influence a particular decision or create a reciprocal obligation.
- The gratuity is customary in the country where the exchange takes place and is not in violation of any laws.
- Public disclosure of the gratuity would not reflect adversely on Sun.
- Wherever practicable, the acceptance of or the provision of the gratuity has been approved by the appropriate manager.
It is never permissible to provide compensation to, or receive compensation from, employees of any customer or supplier (whether in the form of cash, paid vacations, lavish gifts, or otherwise) . Inducements to purchase Sun products and services must be limited to appropriately authorized, published promotional or incentive programs. Any gifts or rewards offered to Sun employees by a third party in connection with the purchase of the third party's products on Sun's behalf must be reported to the appropriate manager and acceptance of such gifts or rewards may be authorized only if the above-mentioned criteria are met. Also, the rules for providing gifts and meals to government officials and contractors are different than those applicable in the strictly commercial context. It is generally not permissible to offer gifts or meals of any value whatsoever to U.S. government officials or employees of U.S. government contractors and employees of such entities are subject to strict rules governing this area (see Section IV.,B.,"Payments to Government Officials").
2.1.1 Case Study
Example: A supplier invites a small group of Sun purchasing personnel out for dinner and picks up the tab. At the end of the evening, he presents each member of the group with a watch, inscribed with the supplier's logo.
Analysis: Whether acceptance of the dinner and the watches is appropriate depends upon the business customs in the industry and the intent underlying the gifts. If the price of the meal is not extravagant and the watches are merely inexpensive advertising novelties, acceptance might be appropriate--if the gifts are clearly intended as an expression of goodwill toward a valued customer and are not offered with the expectation of receiving favorable treatment in return. In any event, a manager who is not included in the group of invitees should decide whether the invitation and gifts should be accepted.
2.2 Handling Third-Party Proprietary and Confidential Information
Many Sun employees receive access to third-party proprietary and confidential information, either directly from the third party or otherwise. To protect Sun against possible claims of misuse or misappropriation, we must understand our obligations with respect to such information.
Often another company will submit its own confidential information directly to a Sun employee and ask that employee to sign a confidentiality agreement. This is understandable; Sun protects its own confidential information in the same manner. However, the third party's confidentiality agreement may contain terms that are onerous or inconsistent with Sun's business practices. In addition, acceptance of the third party's confidential information may harm Sun's intellectual property interests should we subsequently become involved in a dispute over whether we developed a certain technology based on our own independent work or on the third party's confidential information. Therefore, you should never accept such information without appropriate Sun management authorization or sign a third party's confidentiality agreement without Sun Legal Department approval.
Sun has no right to use a third party's confidential information without the consent of the owner. While it is necessary and proper to obtain competitive information through market research, product evaluation and other public information, you may not obtain or attempt to obtain competitive information through unethical or illegal means. In particular, you may not obtain or attempt to obtain confidential information of competitors from the competitor's former employees or from Sun business partners, customers and suppliers doing business with such competitors. If you obtain any third-party information that appears to be confidential, you should find out whether the information is in fact confidential and whether its disclosure to Sun was properly authorized. If such disclosure was not properly authorized, turn the information over to the Sun Legal Department for proper disposition. In addition to constituting a violation of Sun policy, certain types of unauthorized use of third party proprietary information (including improperly receiving such information) may constitute a criminal offense under the Economic Espionage Act of 1996 and subject the offending party to substantial fines and/or imprisonment. Also, unauthorized use of third party proprietary information in connection with a U.S. government procurement may constitute a criminal offense under U.S. government procurement integrity rules (see Section IV below).
When using third party proprietary or copyrighted information, such as software, make sure that you comply with the terms and conditions of the applicable license agreement (if any) and do not violate the third party's intellectual property rights in such information (by using it without the third party's permission or making unauthorized copies, for example). Misuse of any third-party copyrighted work may constitute a crime punishable by fines and imprisonment under applicable copyright laws. If in doubt concerning your proposed use of a third party proprietary or copyrighted work, don't hesitate to contact the Sun Legal Department.
2.2.1 Case Studies
Example 1: A customer shows a Sun sales representative a copy of a Sun competitor's manual, which describes various business policies of that competitor. Although the customer assures the sales representative that he is authorized to possess the manual, it is marked "confidential." The customer offers to let the sales representative make a copy of the manual.
Analysis of Example 1: Although the customer may have the right to possess the manual for his own use, the legend indicates that he is not authorized to distribute copies of it to third parties. The sales representative must decline the offer.
Example 2: A disgruntled employee of a Sun competitor obtains a confidential document concerning his company's marketing strategy and mails the document anonymously to Sun. The document is eventually delivered to a Sun marketing manager. Although the document was delivered without any prior notice or agreement about its confidential nature, the marketing manager realizes that it was intended to be a confidential document. Nevertheless, the marketing manager copies the document and distributes it within Sun.
Analysis of Example 2: The marketing manager should have turned the document over to the Sun Legal Department for return to the competitor. Although such access to a competitor's strategy may seem advantageous initially, the potential consequences to Sun of distributing and using such a document outweigh any perceived benefits. In this situation, the marketing manager had no reasonable basis to believe that his use of the document was properly authorized by the rightful owner.
Example 3: At an internal sales meeting, a Sun sales representative learns that Sun is close to signing an agreement to purchase a large quantity of components from a small public company. Believing that the soon-to-be-released public announcement of this deal will increase that company's stock price, the sales representative purchases a quantity of the stock.
Analysis of Example 3: The sales representative's use of the confidential information concerning this deal is improper and possibly illegal. Sun employees with access to confidential information concerning third parties may no more act on such information for personal gain than they may act on confidential information concerning Sun's own business for personal gain.
2.3 Selection of Customers
As a general rule, Sun is free to do business or refrain from doing business with any potential customer. However, the decision must be made unilaterally and not in consultation with any other customer or competitor. Those dealing with prospective customers should take care not to discuss their possible selection with third parties. If Sun decides not to do business with a particular customer, there is no legal obligation to provide the reason for such refusal, and none should be given.
Once Sun has started providing products to a particular customer, there are certain circumstances where it might prove difficult to unilaterally terminate the relationship. For this reason, consult with the Sun Legal Department before refusing to sell to a current customer. In addition, in no event should the possible termination of an existing customer relationship be discussed with a third party.
2.3.1 Case Study
Example: A Sun reseller complains to a Sun sales representative that another reseller is violating the terms of its contract with Sun. The sales representative assures the complaining reseller that if the allegation proves to be correct, the reseller violating the terms of its contract will be terminated.
Analysis: Although it is appropriate for the sales representative to collect information from the complaining reseller, he should not discuss the potential termination of the other reseller. The complaint should be forwarded to sales management for independent verification of the violation. Sun has a Contracts Compliance Board that is responsible for investigating and remedying potential breaches of Sun's reseller agreements. It is never permissible to discuss the refusal to deal with a potential customer or potential termination of an existing customer with anyone outside of Sun.
2.4 Doing Business with Countries Participating in International Boycotts
U.S. export and tax laws prohibit compliance with international boycotts of friendly countries. Application of these anti-boycott laws extends to the foreign subsidiaries of U.S. corporations. These anti-boycott laws are technical and potential violations are sometimes difficult to identify, but the penalties for violations can be severe. Therefore, all agreements with any governments or customers in countries participating in an international boycott must be reviewed by the Sun Legal Department before execution. In addition, the anti-boycott laws require that all boycott-related requests be reported to the U.S. government. All requests or orders from customers in boycotting countries must be reviewed by the Sun Legal department for anti-boycott law compliance, even if no agreement is entered into with Sun.
2.5 Customers and Antitrust Laws
Most countries have laws that govern seller/customer relationships, particularly where the customer is purchasing products for resale. For example, in many countries you cannot price below cost or engage in other activities that might injure competition or create barriers to other companies entering particular markets. The following is a brief summary of the U.S. antitrust laws that most directly impact Sun's relationship with its customers. The U.S. Department of Justice takes the position that these laws apply to activities outside the United States that affect competition or consumers inside the United States. Consult the Sun Legal Department regarding compliance with competition laws specific to countries outside the U.S.
2.5.1 Resale Price Maintenance
It is illegal to require any customer purchasing products for resale to maintain particular resale prices. All customers must be free to set their own prices, subject only to their own judgment as to what the market will bear. If you deal with customers who intend to resell Sun products, refrain from discussing resale prices with them.
2.5.2 Restrictions on Resellers
It is generally permissible for a manufacturer to impose contractual restrictions unrelated to price on customers purchasing for resale, provided that such restrictions have a legitimate business purpose and are uniformly enforced. In the United States, for example, Sun can legally require selected classes of customers to resell Sun products only in specified geographic areas or with specific added value because this will promote efficient distribution of our products. However, we may not impose restrictions on resale prices (as mentioned above) or prohibit a reseller from competing with Sun. Once a contractual restriction is imposed, it must be enforced against all customers to whom it applies. Therefore, the Sun Legal Department must approve any proposed contractual restraints on resellers and any exceptions to existing restraints.
2.5.2.1 Case Study
Example: A marketing manager for a Sun reseller desires to update her information concerning the prices at which the competition sells a particular line of Sun products. Rather than conduct her own market survey, the marketing manager contacts a friend in the Sun sales organization to ask if Sun can provide this information.
Analysis: Although merely providing resale price information to comply with such a request would not constitute resale price maintenance, the Sun employee should decline to provide the data. The line between providing helpful pricing information and engaging in a violation of the laws prohibiting resale price maintenance is not always this clear. For this reason, Sun's policy is to avoid all discussions concerning resale prices with our resellers.
2.5.3 Tying
Generally speaking, it is illegal to require a customer to purchase one product in order to be eligible to purchase another product. The laws prohibiting "tying" are intended to prevent sellers from using their market power regarding products for which there is strong demand to leverage sales of less popular products. However, it is permissible to offer "package deals," provided that all products included in the package are made separately available at reasonable prices.
2.5.4 Price Discrimination
In the United States, the Robinson-Patman Act prohibits sellers from discriminating in prices, price-related terms and conditions, or promotional services provided to resellers of the same or substantially similar products where the effect of such discrimination would be to substantially lessen competition between the resellers. For this reason, Sun is generally obligated to provide all resellers in a given channel of trade with the same prices and the same opportunity for discounts and promotional allowances. There are some exceptions to this rule, principally involving situations where it is necessary to provide special pricing or promotional services to meet those offered by a Sun competitor. The laws governing this area are complex, and a detailed explanation is beyond the scope of this document. However, those involved in Sun's sales and marketing process should understand the need for the Sun Legal Department's involvement in establishing price, discount, and promotional services policies and in reviewing any proposed deviations from these policies.
2.5.4.1 Case Studies
Example 1: A Sun reseller in the United States purchases products from Sun pursuant to a contract specifying that the reseller must add a particular software package before reselling the products. The reseller discovers an opportunity to make a quick sale of a few Sun products without adding the software package. The Sun sales representative responsible for this account hears of the reseller's plan, but decides that the number of products involved is too small to warrant his attention.
Analysis of Example 1: Despite the apparent insignificance of this breach of a contractual requirement, the sales representative should report the matter to sales management and Sun must take action to enforce the terms of the contract. Failure to take such action could jeopardize Sun's ability to enforce this type of requirement with its other resellers.
Example 2: A Sun customer is considering buying a large number of products for resale. The customer requests lower-than-standard prices, based on the pricing of similar equipment offered by a Sun competitor. The customer says that it will make its purchase decision based on the lowest price.
Analysis of Example 2: As a general rule, the Robinson-Patman Act would prohibit Sun from granting lower prices to this reseller than Sun provides to other customers purchasing the same products in the same volumes for resale. However, assuming that the customer's claim of availability of a lower-priced alternative from a Sun competitor is substantiated and documented, Sun should be able to meet the competition's prices without risking a violation of the Robinson-Patman Act. The Sun Legal Department should be consulted to determine whether all requirements of the meeting competition defense have been established.
2.6 Most Favored Customer Status
Certain of Sun's supply contracts with the U.S. government (and, in special instances, some commercial contracts) contain representations that the customer is receiving the best possible price-related terms and that Sun provides no better terms to similar customers. Such "most favored customer" clauses can have substantial legal and financial implications, and Sun will not agree to them, except where required by the U.S. government (as is the case with our General Services Administration agreements) or where it is otherwise in Sun's business interests to do so. Because the language of such clauses must be carefully drafted to protect Sun's interests, it is essential that they be reviewed by the Sun Legal Department and approved by a member of the Executive Management Group. In addition, the existence of such clauses make it all the more critical that the Sun Legal Department review any deviation from Sun's standard price-related terms because any such deviation might trigger a most favored customer clause and result in an unintended price reduction.
2.7 Representations Regarding Sun Products
Any representation relating to a product which is relied on by a customer in making a decision to purchase that product has the potential of creating a warranty or legally binding commitment that the product will conform in every respect with that representation. For this reason, and to maintain Sun's high standards of credibility in the marketplace, all representations by Sun employees and contractors concerning Sun products and services must be current, accurate and not misleading. Of course, this applies to press releases, marketing materials, representations made in sales situations and representations concerning compliance with test, inspection or quality requirements.
Representations concerning unreleased products or products under development
can present special problems. Improper disclosure of information concerning
such products may have unintended adverse consequences, such as creating
a misleading impression concerning the status of product development, hurting
sales of our current product lines or jeopardizing our ability to secure
patent protection. For this reason, disclosure of information concerning
such products may be made only when the following criteria are met: disclosure
is required for legitimate business or technical reasons; disclosure is
authorized by a corporate executive officer; if non-public information
is involved, disclosure is made only pursuant to a confidentiality agreement
and only on a need-to-know basis; and, the information disclosed is current,
accurate, and not misleading. A good rule of thumb is never promise what
we cannot deliver TODAY. If it becomes necessary to discuss unreleased
products or future product plans, do so only in accordance with the aforementioned
guidelines and make it clear that you are referring to plans that may be
subject to change, not finished product.
3.0 Your Relationship with Competitors
Sun operates in a very competitive business environment and must continue
to compete vigorously to sustain a leadership position in our industry.
In addition, the nature of our business affords many Sun employees ample
opportunity for meeting employees of our competitors, either socially or
through trade associations, standards organizations, and the like. We must
ensure that our methods of beating the competition and our contacts with
employees of our competitors are ethical and lawful.
3.1 Agreements in Restraint of Trade
U.S. antitrust laws expressly limit the types of agreements that may
be entered into between competitors. These laws are designed to safeguard
the free flow of trade and ensure that consumers enjoy the benefits of
competition among suppliers. Therefore, any agreements among competitors
that restrict trade or price competition are illegal. For example, it is
illegal for competitors to reach agreement on the following:
Because the existence of an agreement can sometimes be inferred simply
because two parties had a conversation about a particular subject, you
should never discuss prices, customers, suppliers, or product plans with
employees of a competitor. If you attend a meeting with competitors
where these subjects are raised, you must insist that such conversation
cease or leave the meeting. The consequence of violating the laws governing
this area include fines and imprisonment for the parties involved, as well
as substantial monetary liability for Sun. And remember, sometimes a customer
is also a competitor (certain resellers and licensees, for example); in
these cases, take special care to ensure proper conduct.
Note - Although the discussion above is concerned with U.S. law,
be aware that U.S. law may apply to transactions occurring outside the
United States and that many other countries have similar competition laws.
If you encounter any of the described situations or have any questions
concerning the competition laws specific to a country outside the United
States, consult with the Sun Legal Department.
3.2 Competitive Information
As previously mentioned, Sun must exercise caution in collecting and
handling third-party information. Certainly, it is necessary and proper
to obtain information on our competitors through marketing research, product
evaluation, and study of public documents. However, Sun will not obtain
competitive information by unethical or illegal means, such as industrial
espionage or improper access to confidential information. If you receive
any competitor information that you believe was obtained by such means,
contact the Sun Legal Department to determine the appropriate course of
action. Also, there are specific restrictions applicable to obtaining competitive
information in the government contracting area (see Section IV, "Your Relationship
with U.S. and Foreign Governments").
3.3 Comments Regarding Competitors
A company's reputation is perhaps its single most important asset. For
this reason, the laws against disparagement prohibit making false or deceptive
statements concerning another company and its products. To the extent that
you speak on Sun's behalf (as a sales or marketing representative, for
example), you must ensure that your statements concerning competitors are
based on current, accurate, complete, and relevant data. In no event should
you comment on another company's business reputation or financial or legal
problems. The risks of passing along inaccurate information far outweighs
any perceived benefits of discussing such issues. Sun must continue to
compete on the basis of accurate and meaningful comparisons of products
and services, not speculation concerning the competition's business reputation.
3.3.1 Case Study
Example: A potential customer tells a Sun sales representative that
he is considering evaluating a software product offered by a Sun competitor.
The sales representative has recently read a newspaper article that described
the competitor's financial problems and resulting reduction in support
services. The sales representative suggests that the customer consider
the software competitor's financial trouble and whether it will be in business
much longer.
