Exam 9: Ethics and Competition

The use of patented or copyrighted materials without permission entitled the owner to royalties for use.

If you were a manufacturer who did not wish its brand to be sold in discount stores, what could you do? What are the ethical issues in your decision to not be sold in discount stores?

Martha   Stewart's first franchising deal was with JCPenney.

How much did Boeing have to restate its earnings as a result of the document issue?

Who was fired when the company and government learned of the use of the Lockheed Martin documents?

It is a violation of antitrust laws for a manufacturer to terminate a retailer for charging prices that are too low.

What was the reason for Boeing employees being willing to use the Lockheed documents brought to them when they hired a former Lockheed employee?

What indicated that there might have been some intent on the part of Costco to capitalize on the Tiffany name?

Who recruited whom in the Starwood and Hilton case study?

Joseph Horne Company, a Pittsburgh department store chain, was the target of a management leveraged buyout in 1986 and was suffering with the resultant $160 million in debt. Horne executives were relieved when, in 1988, Dillard Department Stores, Inc., and mall developer Edward J. DeBartolo agreed to buy Horne's stock for $74 million and to assume the 1986 buyout debt. As part of the deal, Dillard's installed data lines and computers in Horne's fourteen stores to prepare for the consolidation. With the stores hooked into its Little Rock, Arkansas, headquarters, Dillard's assumed control of Horne's merchandise purchasing. Dillard's executives wanted financial and purchasing control because the contract price was contingent upon a finding that Horne's financial statements were accurate. Horne's CEO, Robert A. O'Connell, voiced his concerns to E. Ray Kemp, Dillard's vice chairman, about the extent and speed of Dillard's assumption of control. Kemp told O'Connell, "Trust me, it would take an act of God for this deal not to go through." Dillard's had been acquiring department stores like Horne's all over the country, adding 196 stores in five years. From 1987-1991 Dillard's earnings had gained 20 percent through its strategy of taking over financially troubled firms. In 1990, however, Dillard's deal with Horne's fell through, and Horne sued Dillard's and DeBartolo for breach of contract and fraud. Horne's suit alleged that Dillard's plan in taking over the buying and data was to decrease the value of Horne's to get a bargain price. Experts in the industry indicate that Horne demonstrated inexperience by allowing Dillard's rapid infiltration. The contract provided that Horne could veto any proposal for Dillard activity in Horne's business. Between the time the contract was negotiated and Dillard's cancellation of the agreement, Dillard's executives found that some Horne accounting practices were questionable. But some industry experts and Horne executives said Dillard's often "nickels and dimes" sellers to bring down the price. Horne's suit also alleged that Dillard's told 500 employees that their jobs would be gone after the takeover. Thirty percent of those employees quit before Dillard's and DeBartolo withdrew. Because Dillard's took over merchandise buying, Horne maintained, merchandise deliveries were late and the wrong merchandise was ordered for critical periods, such as the holiday season. A Pittsburgh National Bank officer testified in his deposition in the suit that a Dillard's executive told him in 1988 that Dillard's might wait until Horne's bankruptcy to buy the company. Dillard's denies the statement and the plan. Dillard's and Horne's settled the suit in 1992. a.Were the damages Horne's experienced just a consequence of a failed business deal? b. Did Dillard's take advantage of a debt-ridden company? c.What financial-disclosure obligations do takeover targets have? d.Did Dillard's have any special obligations because of its access to Horne's data and buying power? e. Is it unethical to take advantage of a naive party in a commercial transaction?

Granny's Cookies is a bakery located in a small town in Nebraska. However, Granny's has a strong Internet presence and ships cookies throughout the United States. Granny's recipes for its cookies are a trade secret. The employees at the Nebraska store who need to know the recipes to bake the cookies are aware of the recipe. The employees have signed a nondisclosure agreement. Jim Bradford, on of Granny's bakers, just took a job with Chippers, a cookie company located in San Diego, California. Chippers also has a strong Internet presence. S uppose that before he left Jim went into Granny's mailing list, which had been compiled from orders filled for people around the country. Jim changed the e-mail and mailing addresses so that the list was no longer accurate. Jim did not keep a copy of the original list for himself. Which of the following is true?

What happened to the suits for wrongful termination against Boeing?

When did Boeing employees first see Lockheed Martin's proposed bid for the project?

What was the effect of Boeing's merger with McDonnell Douglas and Lockheed Martin's merger with Marietta?