Reference no: EM133298065

Question: Identify an organization's situation (the problem) recommend independent solutions, implement actions, and identify factors that have contributed to failure or success in the case study below

United States v. Hilton Hotels Corporation 467 F.2d 1000 (Ore. 1972)

This is an appeal from a conviction under an indictment charging a violation of section 1 of the Sherman Act.

Operators of hotels, restaurants, hotel and restaurant supply companies, and other businesses in Portland, Oregon, organized an association to attract conventions to their city. To finance the association, members were asked to make contributions in predetermined amounts. Companies selling supplies to hotels were asked to contribute an amount equal to one percent of their sales to hotel members. To aid collections, hotel members, including [Hilton Hotels Corporation] agreed to give preferential treatment to suppliers who paid their assessments, and to curtail purchases from those who did not.

The jury was instructed that such an agreement by the hotel members, if proven, would be a per se violation of the Sherman Act. [Hilton Hotels Corporation] argues that this was error.... [T]he conduct involved here was of the kind long held to be forbidden.... "Throughout the history of the Sherman Act, the courts have had little difficulty in finding unreasonable restraints of trade in agreements among competitors, at any level of distribution, designed to coerce those subject to a boycott to accede to the action or inaction desired by the group or to exclude them from competition."

[T]he necessary and direct consequence of defendants' scheme was to deprive uncooperative suppliers of the opportunity to sell to defendant hotels in free and open competition with other suppliers, and to deprive defendant hotels of the opportunity to buy supplies from such suppliers in accordance with the individual judgment of each hotel, at prices and on terms and conditions of sale determined by free competition....

The primary purpose and direct effect of defendants' agreement was to bring the combined economic power of the hotels to bear upon those suppliers who failed to pay. The exclusion of uncooperative suppliers from the portion of the market represented by the supply requirements of the defendant hotels was the object of the agreement, not merely its incidental consequence.

[Hilton Hotel Corporation's] president testified that it would be contrary to the policy of the corporation for the manager of one of its hotels to condition purchases upon payment of a contribution to a local association by the supplier. The manager of [Hilton's] Portland hotel and his assistant testified that it was the hotel's policy to purchase supplies solely on the basis of price, quality, and service. They also testified that on two occasions they told the hotel's purchasing agent that he was to take no part in the boycott. The purchasing agent confirmed the receipt of these instructions, but admitted that, despite them, he had threatened a supplier with loss of the hotel's business unless the supplier paid the association assessment. He testified that he violated his instructions because of anger and personal pique toward the individual representing the supplier....

The court instructed the jury that a corporation is liable for the acts and statements of its agents "within the scope of their employment," defined to mean "in the corporation's behalf in performance of the agent's general line of work," including "not only that which has been authorized by the corporation, but also that which outsiders could reasonably assume the agent would have authority to do." The court added:

A corporation is responsible for acts and statements of its agents, done or made within the scope of their employment, even though their conduct may be contrary to their actual instructions or contrary to the corporation's stated policies.

Congress may constitutionally impose criminal liability upon a business entity for acts or omissions of its agents within the scope of their employment. Such liability may attach... even though [the conduct] may have been contrary to express instructions....

In enacting the Sherman Act, Congress was passing drastic legislation to remedy a threatening danger to the public welfare....The statute was designed to be a comprehensive charter of economic liberty aimed at preserving free and unfettered competition as the rule of trade. It rests on the premise that the unrestrained interaction of competitive forces will yield the best allocation of our economic resources, the lowest prices, the highest quality and the greatest material progress, while at the same time providing an environment conducive to the preservation of our democratic, political and social institutions.

With such important public interests at stake, it is reasonable to assume that Congress intended to impose liability upon business entities for the acts of those to whom they choose to delegate the conduct of their affairs, thus stimulating a maximum effort by owners and managers to assure adherence by such agents to the requirements of the Act....

Violations of the Sherman Act are a likely consequence of the pressure to maximize profits that is commonly imposed by corporate owners upon managing agents and, in turn, upon lesser employees. In the face of that pressure, generalized directions to obey the Sherman Act, with the probable effect of foregoing profits, are the least likely to be taken seriously. And if a violation of the Sherman Act occurs, the corporation, and not the individual agents, will have realized the profits from the illegal activity....

For these reasons we conclude that as a general rule a corporation is liable under the Sherman Act for the acts of its agents in the scope of their employment, even though contrary to general corporate policy and express instructions to the agent....

The purchasing agent was authorized to buy all of appellant's supplies. Purchases were made on the basis of specifications, but the purchasing agent exercised complete authority as to source. He was it a unique position to add the corporation's buying power to the force of the boycott. [Hilton] could not gain exculpation [freedom from liability] by issuing general instructions without undertaking to enforce those instructions by means commensurate with the obvious risks.