Once, during an interview, the interviewer started asking me solutions to very real-world problems which I could immediately understand they must have been facing at that time. A high level discussion was fine to judge my ability, but he started getting deep into the implementation details. I got the sense that he is trying to get a solution to his problem in the pretext of interview. I gave him the solutions as I would have anyway done so had anybody asked for help. I have since then thought many times but could not decide if it was unethical or just a harmless stroke of creativity.
OPs case certainly seems to have cross the limit of ethics though.
I think those sorts of questions are highly ethical, and should in fact be encouraged.
By asking deep questions about actual problems the company is facing, you get a much better sense of a candidate's relevant abilities than with generic algorithm questions.
I don't this is unnecessarily unethical or unwarranted.
If several members of a team have been struggling with a problem, it's interesting to see a person's first take on it.
Are you coming up with creative new solutions that haven't been brought up in the team's conversations?
Are you coming up with solutions to the problem that the rest of the team immediately crossed off, or even are obviously wrong?
Also, I wouldn't mind getting a taste for the real-world problems I'd be facing at the company. I find it far more shady when I get interviewed, sign a work contract, and find out I'll be working with several other technologies that weren't anywhere in the job description or interview.
Consider it a very short work sample test? I don't think it's particularly unethical; if anything it's better for you to be demonstrating your expertise for real rather than figuring out how to get chickens and foxes over a river.
What costs more - hiring a consultant for a few hours, or putting out a proper job advert, organising the logistics for handling submitted applications, sorting through the candidates, choosing several, receiving them at interview, booking a suitable room, and possibly covering their travel costs?
I would imagine that in quite a few situations, the consultant would be cheaper.
My first job interview went like this. They had a specific problem that they wanted to solve, and asked me how I would do it. I gave my answer (solving the problem for them), and they offered me the job, so I got to spend the next six months implementing my suggestion.
I had a rather lengthy interview process for a one time contract doing some technical documentation. I explained what docs I would provide, how they would be organized and an example of the main docs being used. They ate it all up, and decided to use my stuff as templates using current staff after offering and then rescinding the job.
At the time I decided against pursuing any action against them because I wanted to look ahead to the next opportunity. In retrospect, I should have billed them for my work which they were using.
If you think you can bring a dozen experts in a field you marginally know about under the pretext of a "job interview", talk to them a couple of hours each about your problems, and then go and implement everything they said by yourself without any extra help... what kind of so-called-solution do you think you'll end up with?
If on the other hand you are the victim of one of these "interview scams"... do you think you'd want to establish a long term relationship with someone who's both a scoundrel and a moron? How long do you expect such relationship to last?
I don't think that's so bad- it's what was on the interviewer's mind, probably; and it's useful to know how a potential co-worker thinks. Better than writing fizz-buzz for the thousandth time.
I wouldn't go as far as unethical but I will say it's a bit shady because it really does rob you of the chance to interview properly. Yes, if it is a hard real-world problem you're solving then it will look better on you, but at the same time, those types of hard problems are typically tackled by teams while an interview is more or less focused on YOU, and YOUR ability to work with a team. Or if you'd like I have a friend Frank who would love to come to an interview with me.
I did this once in an interview, but it was a high level "how would you tackle this problem" question. We already had a solution implemented though, so whatever the candidate said wouldn't have mattered much. I think real world problems are far better than the algorithm implementation problems that plague interviewing.
OPs case certainly seems to have cross the limit of ethics though.