• Developing and maintaining consensus standards is such a frustrating, time consuming, and costly process that the most likely participants will be individuals, or organizations, with a serious financial stake in the outcome – special interests.
  
  
• Individuals representing laboratory interests on a consensus committee are likely find themselves overwhelmed by important industry experts, who are well-funded, self-assured, attractive, and highly focused.
  
  
• Scientific reason and technical facts do not necessarily prevail, because a vote based on unsupported, even irrational, opinion can carry as much weight as a vote based on sound science. In general, consensus organizations do not require members to support their positions.
  
  

¹ Gibbs, E.L. Standards – A progress report on standards for laboratory reagent-grade water. Ultrapure Water 20:18-23 (Feb 2003)
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Quotes from the official syllabus of the case:

The codes [of ASME], while only advisory, have a powerful economic influence, many of them being incorporated by reference in federal regulations and state and local laws.

The trial court rejected [Hydro Level’s] request for jury instructions that [ASME] could be held liable for its agents' conduct if they acted within the scope of their apparent authority. Instead, the jury was instructed that [ASME] could be held liable only if it had ratified its agents' actions or if the agents had acted in pursuit of [ASME’s] interests. The jury, nonetheless, returned a verdict for [Hydro Level]. The Court of Appeals affirmed, concluding that [ASME] could be held liable if its agents had acted within the scope of their apparent authority. [The Supreme Court affirmed the decision of the Court of Appeals.]

[ASME] is civilly liable under the antitrust laws for the antitrust violations of its agents committed with apparent authority.

Under general rules of agency law, principals are liable when their agents act with apparent authority and commit torts analogous to the antitrust violation presented here. An agent who appears to have authority to make statements for his principal gives to his statements the weight of the principal's reputation - in this case, the weight of [ASME’s] acknowledged expertise in boiler safety.

[ASME] wields great power in the Nation's economy, and when it cloaks its subcommittee officials with the authority of its reputation, it permits those agents to affect the destinies of businesses and thus gives them the power - as illustrated by the facts of this case - to frustrate competition in the marketplace.

Briefs of amici curiae urging reversal were filed by ...Lewis H. Van Dusen, Jr., for the American Society for Testing and Materials...

Miscellaneous quotes from official opinion of Supreme Court:

[ASME] is a nonprofit membership corporation organized in 1880 under the laws of the State of New York. This case presents the important issue of the Society's civil liability under the antitrust laws for acts of its agents performed with apparent authority. Because the judgment of the Court of Appeals upholding civil liability is consistent with the central purposes of the antitrust laws, we affirm that judgment.

ASME promulgates and publishes over 400 separate codes and standards for areas of engineering and industry. These codes, while only advisory, have a powerful influence: federal regulations have incorporated many of them by reference, as have the laws of most States, the ordinances of major cities, and the laws of all the Provinces of Canada. Obviously, if a manufacturer's product cannot satisfy the applicable ASME code, it is at a great disadvantage in the marketplace.

As the Court of Appeals observed, under general rules of agency law, principals are liable when their agents act with apparent authority. [The Court gives four examples of when ASME is responsible for the actions of its officers:]

1. a principal is liable for an agent's fraud though the agent acts solely to benefit himself, if the agent acts with apparent authority.
2. a principal is liable for an agent's misrepresentations that cause pecuniary loss to a third party, when the agent acts within the scope of his apparent authority.
3. if an agent is guilty of defamation, the principal is liable so long as the agent was apparently authorized to make the defamatory statement.
4. a principal is responsible if an agent acting with apparent authority tortiously injures the business relations of a third person.
   

Under an apparent authority theory, "[l]iability is based upon the fact that the agent's position facilitates the consummation of the fraud, in that from the point of view of the third person the transaction seems regular on its face and the agent appears to be acting in the ordinary course of the business confided to him." ...In other words, "one who appears to have authority to make statements for the [principal] gives to his statements the weight of the [principal's] reputation," - in this case, the weight of ASME's acknowledged expertise in boiler safety.

ASME's system of codes and interpretative advice would not be effective if the statements of its agents did not carry with them the assurance that persons in the affected industries could reasonably rely upon their apparent trustworthiness. Behind the principal's liability under an apparent authority theory, then, is "business expediency - the desire that third persons should be given reasonable protection in dealing with agents."

We hold that the apparent authority theory is consistent with the congressional intent to encourage competition. ASME wields great power in the Nation's economy. Its codes and standards influence the policies of numerous States and cities, and, as has been said about "so-called voluntary standards" generally, its interpretations of its guidelines "may result in economic prosperity or economic failure, for a number of businesses of all sizes throughout the country," as well as entire segments of an industry. ASME can be said to be "in reality an extra-governmental agency, which prescribes rules for the regulation and restraint of interstate commerce." When it cloaks its subcommittee officials with the authority of its reputation, ASME permits those agents to affect the destinies of businesses and thus gives them the power to frustrate competition in the marketplace.

Furthermore, a standard-setting organization like ASME can be rife with opportunities for anticompetitive activity. Many of ASME's officials are associated with members of the industries regulated by ASME's codes. Although, undoubtedly, most serve ASME without concern for the interests of their corporate employers, some may well view their positions with ASME, at least in part, as an opportunity to benefit their employers. When the great influence of ASME's reputation is placed at their disposal, the less altruistic of ASME's agents have an opportunity to harm their employers' competitors through manipulation of ASME's codes.

It is true that imposing liability on ASME's agents themselves will have some deterrent effect, because they will know that if they violate the antitrust laws through their participation in ASME, they risk the consequences of personal civil liability. But if, in addition, ASME is civilly liable for the antitrust violations of its agents acting with apparent authority, it is much more likely that similar antitrust violations will not occur in the future. "[P]ressure [will be] brought on [the organization] to see to it that [its] agents abide by the law." Only ASME can take systematic steps to make improper conduct on the part of all its agents unlikely, and the possibility of civil liability will inevitably be a powerful incentive for ASME to take those steps. Thus, a rule that imposes liability on the standard-setting organization - which is best situated to prevent antitrust violations through the abuse of its reputation - is most faithful to the congressional intent that the private right of action deter antitrust violations.

ASME insists that it should not be held liable unless it ratified the actions of its agents. But a ratification rule would have anticompetitive effects, directly contrary to the purposes of the antitrust laws. ASME could avoid liability by ensuring that it remained ignorant of its agents' conduct, and the antitrust laws would therefore encourage ASME to do as little as possible to oversee its agents. Thus, ASME's ratification theory would actually enhance the likelihood that the Society's reputation would be used for anticompetitive ends.

ASME contends that it should not be held liable unless its agents act with an intent to benefit the Society. This proposed rule falls short, though, because it is simply irrelevant to the purposes of the antitrust laws. Whether they intend to benefit ASME or not, ASME's agents exercise economic power because they act with the force of the Society's reputation behind them. And, whether they act in part to benefit ASME or solely to benefit themselves or their employers, ASME's agents can have the same anticompetitive effects on the marketplace.

ASME contends it should not bear the risk of loss for antitrust violations committed by its agents acting with apparent authority because it is a nonprofit organization, not a business seeking profit. But it is beyond debate that nonprofit organizations can be held liable under the antitrust laws. Although ASME may not operate for profit, it does derive benefits from its codes, including the fees the Society receives for its code-related publications and services, the prestige the codes bring to the Society, the influence they permit ASME to wield, and the aid the standards provide the profession of mechanical engineering.

When ASME's agents act in its name, they are able to affect the lives of large numbers of people and the competitive fortunes of businesses throughout the country. By holding ASME liable under the antitrust laws for the antitrust violations of its agents committed with apparent authority, we recognize the important role of ASME and its agents in the economy, and we help to ensure that standard-setting organizations will act with care when they permit their agents to speak for them. We thus make it less likely that competitive challengers like Hydrolevel will be hindered by agents of organizations like ASME in the future.

A Footnote by Majority [Footnote 15]:

Indeed, ASME has initiated procedures to protect against similar misadventures in the future. After its experience with the Hydrolevel affair, ASME began issuing a publication containing all written technical inquiries pertaining to codes and their interpretations, a publication available through subscription. Apparently, ASME now gives its interpretations close scrutiny through the publication process. According to the publication's foreword, "[i]n some few instances, a review of the interpretation revealed a need for corrections of a technical nature." In those cases, ASME published "a corrected interpretation . . . immediately after the original reply." In addition, the readers are advised that ASME may reconsider its interpretation "when or if additional information is available which the inquirer believes might affect the interpretation."

ASME's new procedure illustrates that the standard-setting organization itself is in the best position to prevent antitrust violations committed by its agents acting with apparent authority, and therefore that the policies of antitrust and agency law call for imposition of liability upon ASME.

A Footnote by Minority [Footnote 17]:

The Court's argument that the imposition of treble damages will advance antitrust enforcement has a hollow ring in the context of a membership, nonprofit organization. Organizations of this kind normally function through committees composed - as in this case - of volunteers who are not employees, serve only at infrequent intervals, and are virtually uncontrollable by what usually is a small headquarters staff.

The Court suggests that voluntary organizations can "take steps to reduce the likelihood that antitrust violations like the one that occurred in this case will take place in the future." The Court then refers to "new procedures" adopted by ASME, and criticizes my dissent for refusing "to accept that ASME and other such organizations can react to potential antitrust liability by making their associations less subject to fraudulent manipulation."

It would be enlightening if the Court would explain how such an association can protect itself even from "mere tort" liability, much less the treble-damages liability imposed in this case, in light of the Court's adoption of the apparent authority theory of liability. Review procedures well may be helpful to prevent mistakes made in good faith on behalf of an association. But no set of rules and regulations, and no procedures however elaborate, can protect adequately against fraud and disloyalty. In this case, for example, if ASME had required approval by a review committee or even by its governing body before the release of each of the thousands of ruling letters, a member bent on fraud could forge evidence or otherwise circumvent most safeguards. In practice, a rule of apparent authority can be a rule of strict liability as the Court today holds in this case. In the context of a loosely structured, voluntary nonprofit association it may be wholly impractical to adopt any measures that will lessen substantially the likelihood of liability, and if there is liability the Court also would impose punitive damages.