After Apple, Google, Adobe, Pixar, And Intuit, Antitrust Employment Charges Hit eBay

November 19, 2012

Funny thing about so-called free market advocates who find themselves as guests on a lot of cable TV financial shows, they talk the talk, but then you find out that they don't always walk the walk.

Now, don't get me wrong - I'm an unrepentant capitalist myself with very firm libertarian leanings, which means I favor limited government intrusion into our boardrooms and bedrooms.  On the other hand, I also appreciate the need for reasonable regulation and the fair administration of justice. Finding a way to balance all of those sometimes competing beliefs presents quite a challenge.

Which brings me back to all those big shots who mouth off about free markets, capitalism, American entrepreneurial spirit, and, the like.   Funny, isn't it, how so many of those folks turn out to be hypocrites.  The first chance they get to rig a deal or the system, why all their high fallutin' free market passion evaporates.

Consider the following circumstances:

  • Beginning no later than 2006, Apple and Google senior executives
  • Beginning no later than May 2005, senior Apple and Adobe senior executives
  • Beginning no later than April 2007, Apple and Pixar senior executives
  • Beginning no later than September 2007, Google and Intel senior executives
  • In June 2007, Google and Intuit senior executives

agreed not to cold call each other's employees. Generally, the off-setting company to the agreement was placed on the other company's internal "Do Not Call" list, which instructed employees not to directly solicit employees from the covered firm.

Cold Call Freeze

On September 24, 2012, Adobe Systems Inc., Apple Inc., Google Inc., Intel Corp., Intuit Inc. and Pixar settled with the Department of Justice concerning allegations in a civil antitrust Complaint that they had entered into non-solicitation agreements involving their highly-skilled employees.  Rather than merely understandings formulated and enforced at the lower echelons of the cited organizations, the Complaint alleged that the agreements were formed and actively managed by senior executives.  Apparently the C-Suites saw eye to eye.

In the high technology sector, there is a strong demand for employees with advanced or specialized skills, and among the principal means by which high tech companies recruit such candidates is to solicit them directly from other companies via "cold calling."   By restricting cold calling and putting in place what basically amounted to a ceasefire against poaching, the cited companies allegedly engaged in anticompetitive non-solicitation agreements.   Although theComplaint alleged only that the companies agreed to ban cold calling, the settlement more broadly prohibited the companies from entering, maintaining or enforcing any agreement that in any way prevents any person from soliciting, cold calling, recruiting, or otherwise competing for employees.

For More Details, see these source materials inUnited States v. Adobe Systems, Inc., Apple Inc., Google Inc., Intel Corporation, Intuit, Inc., and Pixar

Missed One

Oops . . . the Antitrust Division seems to have missed one. On November 16, 2012, the Department of Justice / Antitrust Division filed a civil antitrust lawsuit in the Northern District of California against eBay Inc., alleging that beginning no later than 2006 and lasting at least until 2009, eBay and Intuit entered an illegal agreement that restricted their ability to actively recruit certain employees from the other company, and for some period of time even restricted at least eBay from hiring any employees at Intuit.  Seems that the two company were frequently in direct competition over retaining the services of computer engineers, scientist, and other specialized employees covered by the non-competition agreements. In 2007, eBay agreed that it would not recruit Intuit's employees.   eBay's recruiting personnel were instructed to not pursue potential applications that came from Intuit and to throw away such resumes.

You remember Intuit, don't you?  It was among the six firms cited in the 2010 Complaint.  Looks like poor old eBay got snared into the cold-call cold war and agreed to the same brokered deal about no poaching.  The 2012 antitrust lawsuit asserts that the Intuit / eBay agreement eliminated competition to the detriment of affected employees, who were likely deprived of access to better job opportunities and salaries. Notably, Meg Whitman, then eBay's CEO, and Scott Cook, Intuit's founder and executive committee chair, are alleged to have been intimately involved in forming, monitoring and enforcing the agreement. Again, the C-Suites seem to have seen eye to eye.

The antitrust lawsuit seeks to prevent eBay from adhering to or enforcing the agreement and from entering into any similar agreements with any other companies.   Intuit, of course, was already subject to the 2010 settlement noted above and it was not deemed necessary to name that firm in the new complaint. The theory is that the relief the obtained in the previous settlement with Intuit is sufficient to prevent the firm from entering into these types of agreements.  The investigation by the Antitrust Division of the eBay / Intuit non-competition agreement arose from the division's December 2010 lawsuit against Lucasfilm for entering into a similar agreement with Pixar.

Bill Singer's Comment

You may enjoy a stroll down memory lane to May 25, 2010 when then California Gubernatorial candidate Meg Whitman appeared on CNBC's "The Kudlow Report" and, among other things, complains that California is"losing too many jobs overseas and to other states." Whitman promises an innovative "plan to create two million private sector jobs by 2015."  (about 2 minutes into the tape)

Odd though, I've replayed the tape a few times and don't quite seem to hear any reference to Whitman's utilization of illegal, non-competition agreements to artificially depress salaries and employment opportunities - nor do I hear her discuss any connection between artificially constrained compensation packages and the impact such anticompetitive conspiracies have on driving qualified employees into other industries, states, and countries.

I believe in robust competition in a free-market environment. I believe that competition is the mother of innovation, lower prices, and efficiency. I believe that every employee has the right to join an employer or quit an employer and should be allowed to negotiate for the best compensation package.  When you artificially inhibit such factors, it generally works as a disservice to the industry, its employees, and the public.

Companies should seek to retain the loyalty of their employees not only via salaries and benefits but by creating a nurturing workplace that rewards accomplishment.  Although take-home pay will generally be a paramount motivator for taking  a job, ask enough veteran workers about what keeps them at a company and what drives them away and you're apt to hear far more considerations than the numbers on a paycheck.  When a given industry tries to hermetically seal itself off from the real world by engaging in a misguided protocol of not hiring workers from competitors, likely such machinations produce the undesired effect of dampening the attraction of that industry to qualified workers, who ultimately peddle their services to other industries or leave the rigged jurisdiction.

UPDATE: For those of you interested in the actual prohibitions set forth in the Final Judgment for the 2010 Complaint:


Each Defendant is enjoined from attempting to enter into, entering into, maintaining or enforcing any agreement with any other person to in any way refrain from, requesting that any person in any way refrain from, or pressuring any person in any way to refrain from soliciting, cold calling, recruiting, or otherwise competing for employees of the other person.


A. Nothing in Section IV shall prohibit a Defendant and any other person from attempting to enter into, entering into, maintaining or enforcing a no direct solicitation provision, provided the no direct solicitation provision is:

  1. contained within existing and future employment or severance agreements with the Defendant's employees;
  2. reasonably necessary for mergers or acquisitions, consummated or unconsummated, investments, or divestitures, including due diligence related thereto;
  3. reasonably necessary for contracts with consultants or recipients of consulting services, auditors, outsourcing vendors, recruiting agencies or providers of temporary employees or contract workers;
  4. reasonably necessary for the settlement or compromise of legal disputes; or
  5. reasonably necessary for (i) contracts with resellers or OEMs; (ii) contracts with providers or recipients of services other than those enumerated in paragraphs V.A. 1 - 4 above; or (iii) the function of a legitimate collaboration agreement, such as joint development, technology integration, joint ventures, joint projects (including teaming agreements), and the shared use of facilities.

B. All no direct solicitation provisions that relate to written agreements described in Section V.A.5.i, ii, or iii, that a Defendant enters into, renews, or affirmatively extends after the date of entry of this Final Judgment shall:

  1. identify, with specificity, the agreement to which it is ancillary;
  2. be narrowly tailored to affect only employees who are anticipated to be directly involved in the agreement;
  3. identify with reasonable specificity the employees who are subject to the agreement;
  4. contain a specific termination date or event; and
  5. be signed by all parties to the agreement, including any modifications to the agreement.

C. For all no direct solicitation provisions that relate to unwritten agreements described in Section V.A.5.i, ii, or iii, that a Defendant enters into, renews, or affirmatively extends after the date of entry of this Final Judgment, the Defendant shall maintain documents sufficient to show:

  1. the specific agreement to which the no direct solicitation provision is ancillary;
  2. the employees, identified with reasonable specificity, who are subject to the no direct solicitation provision; and
  3. the provision's specific termination date or event.

D. Defendants shall not be required to modify or conform, but shall not enforce, any no direct solicitation provision to the extent it violates this Final Judgment if the no direct solicitation provision appears in Defendants' consulting or services agreements in effect as of the date of this Final Judgment (or in effect as of the time a Defendant acquires a company that is a party to such an agreement).

E. Nothing in Section IV shall prohibit a Defendant from unilaterally deciding to adopt a policy not to consider applications from employees of another person, or to solicit, cold call, recruit or hire employees of another person, provided that Defendants are prohibited from requesting that any other person adopt, enforce, or maintain such a policy, and are prohibited from pressuring any other person to adopt, enforce, or maintain such a policy. . .