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United States v. Hilton Hotels Corp.

September 26, 1972

UNITED STATES, PLAINTIFF-APPELLEE,
v.
HILTON HOTELS CORP., ET AL., DEFENDANTS; WESTERN INTERNATIONAL HOTELS CO., DEFENDANT-APPELLANT



Browning, Hufstedler and Trask, Circuit Judges.

Author: Browning

BROWNING, C.J.:

This is an appeal from a conviction under an indictment charging a violation of section 1 of the Sherman Act, 15 U.S.C. ยง 1.

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 per cent of their sales to hotel members. To aid collections, hotel members, including appellant, agreed to give preferential treatment to suppliers who paid their assessments, and to curtail purchases from those who did not.

I

The jury was instructed that such an agreement by the hotel members, if proven, would be a per se violation of the Sherman Act. Appellant argues that this was error.

We need not explore the outer limits of the doctrine that joint refusals to deal constitute per se violations of the Act, for the conduct involved here was of the kind long held to be forbidden without more. "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." Barber, Refusals to Deal under the Federal Antitrust Laws, 103 U. Pa. L. Rev. 847, 872-73 (1955); see also Report of the Attorney General's National Committee to Study the Antitrust Laws 133, 137 (1955). Familiar examples include United States v. General Motors Corp., 384 U.S. 127, 145-47, 16 L. Ed. 2d 415, 86 S. Ct. 1321 (1966); Klor's, Inc., v. Broadway-Hale Stores, 359 U.S. 207, 211-12, 3 L. Ed. 2d 741, 79 S. Ct. 705 (1959); Fashion Originators' Guild of America, Inc. v. FTC, 312 U.S. 457, 465, 85 L. Ed. 949, 61 S. Ct. 703 (1941); and Eastern States Retail Lumber Dealers' Ass'n v. United States, 234 U.S. 600, 614, 58 L. Ed. 1490, 34 S. Ct. 951 (1914).

Appellant argues that in these and other cases in which the per se rule has been applied to refusals to deal, the defendants intended "to destroy a competitor or a line of competition," while the purpose of the defendants in the present case "was solely to bring convention dollars into Portland." But the 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. Defendants therefore "intended" to impose these restraints upon competition in the only sense relevant here. See United States v. Griffith, 334 U.S. 100, 105-06, 92 L. Ed. 1236, 68 S. Ct. 941 (1948); United States v. Patten, 226 U.S. 525, 543, 57 L. Ed. 333, 33 S. Ct. 141 (1912). The ultimate objective they sought to achieve is immaterial. Klor's Inc., v. Broadway-Hale Stores, supra, 359 U.S. at 211-13. See also Radiant Burners, Inc., v. Peoples Gas Light & Coke Co., 364 U.S. 656, 659-60, 5 L. Ed. 2d 358, 81 S. Ct. 365 (1960); and Fashion Originators' Guild v. FTC, supra, 312 U.S. at 466-67.

Running through appellant's argument is the theme that the suppliers complied with the urgings of the hotels to contribute because they wished to maintain friendly business relations with these important customers; that this sort of "coercion," and submission to it, is common in American business life, and should not be subject to the Sherman Act unless it is shown that in the particular case it was intended to have, or had, an unreasonable impact upon price, quality, or service.

If the argument is that the evidence did not show an agreement on the part of the hotels to prefer suppliers who paid their contribution over those who did not, we reject it on the ground that the evidence was clearly sufficient to establish such an agreement. If the argument is that such use by the defendant hotels of their combined economic power to coerce suppliers violates the Sherman Act only if price, service, or quality is adversely affected, we reject it on the authority of Klor's Inc., v. Broadway-Hale Stores, supra, 359 U.S. at 212.

Appellant argues that since the suppliers were also members of the association, the per se rule is inapplicable because "the request for contribution and the alleged coercive action was among members of the same association" and the "implied threat of coercion or preference can be said simply to be an incidental effect of regulations within the group inter se."

The circumstance that both the boycotters and their victims were members of the same trade association would not diminish the impact of the boycott on competition, and appellant does not explain why it should affect the legality of the boycott. This same factual circumstance appears to have been present, for example, in Fashion Originators' Guild v. FTC, supra, 312 U.S. at 461.

The evidence does not show that the suppliers joined in the agreement that the hotels would cease dealing with those that failed to pay, but the result would not be changed if it had. It is nto the primary purpose of the Sherman Act to protect deserving private persons, but to vindicate the public interest in a free market.*fn1 Northern Pacific Ry. v. United States, 356 U.S. 1, 4, 2 L. Ed. 2d 545, 78 S. Ct. 514 (1956); D.R. Wilder Mfg. Co. v. Corn Products Refining Co., 236 U.S. 165, 174, 59 L. Ed. 520, 35 S. Ct. 398 (1915).

This is not a case in which joint activity having a primary purpose and direct effect of accomplishing a legitimate business objective is also alleged to have had an incidental and indirect adverse effect upon the business of some competitors. See, for example, Chicago Board of Trade v. United States, 246 U.S. 231, 62 L. Ed. 683, 38 S. Ct. 242 (1918); Bridge Corp. of America v. American Contract Bridge League, 428 F.2d 1365 (9th Cir. 1970); Joseph E. Seagram & Sons, Inc. v. Hawaiian Oke & Liquors, Ltd., 416 F.2d 71 (9th Cir. 1969); Deesen v. Professional Golfers' Ass'n of America, 358 F.2d 165 (9th Cir. 1966).*fn2 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.

II

Appellant'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 appellant'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. See note 1.

Based upon this testimony, appellant requested certain instructions bearing upon the criminal liability of a corporation for the unauthorized acts of its agents. These requests were rejected by the trial court. 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 ...


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