Today’s high-tech companies operate in an extremely competitive world that requires highly skilled employees to develop new cutting edge technologies and products. Identifying, contacting, and attracting such potential qualified employees is a challenge for high-tech companies, as well as other specialized industries such as pharmaceutical and computer engineering.
In light of this reality, it might not have come as a complete surprise that the U.S. Department of Justice’s Antitrust Division announced in September that it had filed an antitrust complaint against six of the nation’s biggest high-tech companies that had entered into agreements to restrict solicitation of each other’s employees. The complaint filed in U.S. District Court in Washington, D.C., charged Adobe Systems, Inc., Apple, Inc., Google, Inc., Intel Corp., Intuit Inc., and Pixar with violating Section 1 of the Sherman Act by entering into agreements not to “cold call” any employee at the other companies, and to actively enforce such agreements resulting, the government alleged, in the disruption of competitive market forces for employee talent.
Particularly, the government’s complaint states: “In a well functioning labor market, employers compete to attract the most valuable talent for their needs. Defendants’ concerted behavior both reduced their ability to compete for employees and disrupted the normal price-setting mechanisms that apply in the labor setting. These no cold call agreements are facially anticompetitive because they eliminated a significant form of competition to attract high-tech employees, and, overall, substantially diminished competition to the detriment of the affected employees who were likely deprived of competitively important information and access to better job opportunities.”
Simultaneously with the filing of the complaint, the government and the high-tech defendants entered into a settlement agreement which, if approved by the court, will prohibit the companies from engaging in anticompetitive no solicitation agreements, including agreements to refrain from cold calling, soliciting, recruiting or otherwise competing for employees of the other company. The settlement agreement does recognize, however, that there may be certain circumstances where such agreements are justified where there are joint development, technology integration, and joint ventures between high-tech companies that promote economic efficiency and do not unreasonably restrict competition. However, none of those legitimate joint collaborative activities were involved in these blatant agreements to keep “hands off” of competitors’ employees.
The Sherman Act was first enacted into law in 1890. It prohibits every contract, combination, and conspiracy in restraint of trade, provides for treble damages and fines of up to $100 million for corporations, and fines to individuals of up to $1 million, as well as potential criminal liability including imprisonment of up to 10 years. New Jersey also has a state antitrust act that closely parallels the federal statute.
It is surprising that such leading companies in the high-tech industry would have entered into these no solicitation agreements in light of their familiarity with the antitrust laws. It is a reminder to employers and HR administrators, however, that their actions are also subject to antitrust scrutiny and potentially subject their companies and themselves to significant civil as well as criminal liability.
Lionel J. Frank, Esq., is a partner with the Lawrenceville firm of Szaferman, Lakind, Blumstein & Blader, P.C. He is a former New Jersey Deputy Attorney General with the Division of Criminal Justice, Antitrust Section. Mr. Frank has broad experience in antitrust law and unfair competition, trademark and copyright, and corporate law.
