The Ethics of “Commercial Bribery”: Integrative Social Contract Theory Meets Transaction Cost Economics

Journal of Business Ethics · 2009 · Volume 88 · Issue 4

Abstract

This article provides anISCTanalysis of commercial bribery focused on transaction cost economics. In the language of Antitrust, commercial bribery is a form of vertical arrangement subject to the same efficiency analysis that has found other vertical arrangements potentially beneficial to consumers. My analysis shows that actions condemned as commercial bribery in the Honda case (1996) may well have benefited Honda’s dealer network once promotional free riding and other forms of rent seeking by dealers are considered. I propose that the term “commercial bribery” should be avoided until after anISCTanalysis shows that the community is likely to have been harmed. The term “third-party payments” is a more ethically neutral term with which to begin the analysis.

Keywords

business ethics, commercial bribery, dealer promotion, ethical rent seeking, federalism, free riding, informational role of prices, ISCT, transaction cost economics, vertical arrangements

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