On November 16, the DOJ Antitrust Division filed an antitrust
action against eBay, alleging that "[s]enior executives at
eBay and Intuit entered into an evolving 'handshake'
agreement . . . [that] prohibited either company from soliciting
one another's employees . . . ." United States v.
eBay, Inc., Case No. 5:12-cv-05869 (N.D. Cal 2012).
See Compl. at ¶ 2. The action, coming less than two
years after a similar lawsuit against Adobe Systems, confirms the
Antitrust Division's strong interest in challenging employer
agreements not to "poach" competitor's employees and
demonstrates, once again, that the scope of the antitrust laws is
not limited to "price fixing" agreements.
The DOJ Complaint, filed in federal court in San Jose,
California, accuses eBay of violating Section 1 of the Sherman Act,
which prohibits agreements among competitors that unreasonably
restrain trade. Specifically, the Complaint alleges that eBay's
most senior officers "were intimately involved in forming,
monitoring, and enforcing" an agreement with Intuit not to
hire one another's employees, and that this alleged agreement
"harmed employees by lowering the salaries and benefits they
might otherwise have commanded, and deprived these employees of
better job opportunities at the other company." In support of
its claims, DOJ quotes from an email from an eBay recruiter stating
that "Meg Whitman [then CEO of eBay] and Scott Cook
[Inuit's Founder and Chairman] entered into [an] agreement
(handshake style, not written) that eBay would not hire from
Intuit, period." Compl. at ¶ 21. The Complaint further
alleges that Intuit agreed to reciprocate - and not recruit or hire
eBay employees as well - and that after Intuit subsequently
recruited an eBay employee, contrary to the alleged agreement,
Whitman asked Cook to "remind your folks not to send this
stuff to eBay people." Id. Cook allegedly then
responded "#@%&*!! Meg my apologies. I'll find out how
this slip up occurred . . ." Id. Not surprisingly,
eBay's alleged conduct also attracted the attention of the
California Attorney General's office, which filed a parallel
action against eBay. Notably, however, while the DOJ case seeks
only injunctive relief, prohibiting the parties from enforcing the
alleged agreement, the California action, which also adds claims
under the California antitrust law and the California unfair
competition statute, also seeks a civil penalty of $2,500 per
violation.
Adobe SystemsRevisited
If the DOJ's case against eBay sounds somewhat familiar, it
should, because it was approximately two years ago, in September of
2010, that the DOJ Antitrust Division filed a similar action
against Adobe Systems, Apple, Google, Intel, Pixar and Intuit.
United States v. Adobe Systems Inc., et al., Case No.
1:10-CV-1629 (D.D.C. 2010). In that matter, the DOJ alleged that
the parties entered into, and actively enforced, agreements between
them prohibiting the practice of "cold calling" one
another's employees with competing job offers. The filing led
to a quick settlement, with each of the defendants, including
Intuit, agreeing to the entry of a Stipulated Judgment calling for
the termination of any and all agreements limiting the parties'
ability to recruit employees from competing firms. Thus, because
Intuit had already agreed to the injunctive relief sought in the
DOJ case against eBay, the DOJ chose not to file suit against
Intuit again, and because the alleged conduct with eBay occurred
prior to the entry of the Stipulated Judgment, Intuit was not in
violation of that decree.
Lesson Learned?
If the DOJ's message in Adobe Systems wasn't
clear enough, the filing of the action against eBay leaves
no room for doubt - agreements among competitors that restrict an
employee's ability to increase his or her compensation and
benefits through lateral movement can present serious antitrust
risks, and will be aggressively pursued by DOJ (and state antitrust
enforcers). In addition, like Adobe before it, eBay may soon also
find itself a defendant in an antitrust class action proceeding
brought by an aggrieved class of employees, seeking significant
damages - trebled under the antitrust laws - rather than simply the
injunctive relief sought by DOJ in its suit or the limited
penalties sought by the California Attorney General. Accordingly,
employers - and particularly those with highly skilled and sought
after employees - would be well advised to carefully consider the
manner in which they seek to "protect" their human
capital going forward, or risk serious consequences under the
antitrust laws.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
Specific Questions relating to this article should be addressed directly to the author.
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