US sues/settles with Apple, Google, Intel...

No-poaching pacts 'anticompetitive'

On Friday, the US Department of Justice sued and then announced a settlement with Apple, Google, Intel, Adobe, Intuit, and Pixar, in a move that will stop the six companies from entering into what the DoJ characterized as "anticompetitive employee solicitation agreements."

According to the DoJ's announcement of the suit and settlement, the companies had entered into no-poaching pacts that "diminished competition to the detriment of affected employees who were likely deprived of competitively important information and access to better job opportunities."

The DoJ's action comes as no surprise. As The Reg has previously noted, top-flight Silicon Valley companies have long been reported to have entered into sub-rosa agreements to prevent the poaching of top-flight employees.

Or they've tried to. Palm, for example, reportedly declined an offer from Apple to enter into such an agreement. Google, on the other hand, had no such qualms — reports surfaced in mid-2009 that Mountain View had agreed to such a pact with Cupertino.

A DoJ investigation into the practice had long been rumored, and Friday the rumors shed their cloak of secrecy and became public.

Among the offending anticompetitive practices, as explained by the DoJ in its lawsuit, were the following:

• "Beginning no later than 2006, Apple and Google executives agreed not to cold call each other's employees. Apple placed Google on its internal 'Do Not Call List,' which instructed employees not to directly solicit employees from the listed companies. Similarly, Google listed Apple among the companies that had special agreements with Google and were part of the 'Do Not Cold Call' list.
• "Beginning no later than May 2005, senior Apple and Adobe executives agreed not to cold call each other’s employees. Apple placed Adobe on its internal 'Do Not Call List' and similarly, Adobe included Apple in its internal list of 'Companies that are off limits'.
• "Beginning no later than April 2007, Apple and Pixar executives agreed not to cold call each other's employees. Apple placed Pixar on its internal 'Do Not Call List' and senior executives at Pixar instructed human resources personnel to adhere to the agreement and maintain a paper trail.
• "Beginning no later than September 2007, Google and Intel executives agreed not to cold call each other's employees. In its hiring policies and protocol manual, Google listed Intel among the companies that have special agreements with Google and are part of the 'Do Not Cold Call' list. Similarly, Intel instructed its human resources staff about the existence of the agreement.
• "In June 2007, Google and Intuit executives agreed that Google would not cold call any Intuit employee. In its hiring policies and protocol manual, Google also listed Intuit among the companies that have special agreements with Google and are part of the 'Do Not Cold Call' list."

Under the terms of the proposed settlement, such activities are now verboten.

In addition, the DoJ notes, although the suit filed on Friday alleges only that the companies colluded in agreements to ban cold-calling, the settlement goes further by enjoining the six from "entering, maintaining or enforcing any agreement that in any way prevents any person from soliciting, cold calling, recruiting, or otherwise competing for employees."

Although the suit and settlement involve only the six companies mentioned above, other firms engaging in no-poaching pacts shouldn't breathe a sigh of relief. According to the DoJ, its Antitrust Division "continues to investigate other similar no solicitation agreements."

The DoJ is making its move, according to their statement, with the well-being of high-tech employees in mind. No-poaching pacts "interfered with the proper functioning of the price-setting mechanism that otherwise would have prevailed in competition for employees," and its elimination will result in "better career opportunities" for "employees with advanced or specialized skills" for which there is "strong demand."

The proposed settlement will be published in The Federal Register, at which time a 60-day comment period will commence. At the end of that period, the US District Court for the District of Columbia will enter its ruling.

Then, if the court accepts the settlement, the invisible hand that controls the "price-setting mechanism" will be unshackled. ®

Bootnote

It will be interesting to see how the settlement, if approved, will affect Google's stated policy of not hiring too many smart people.