Antitrust Division Reaffirms Commitment To Challenge Employee Non-Solicitation Agreements

Author:Mr Barry Nigro, Jr., Peter Guryan and Alyson L. Redman
Profession:Fried Frank Harris Shriver & Jacobson

On November 16, 2012, the Antitrust Division of the Department of Justice (the "DOJ"), along with the California Attorney General, filed suit against eBay, alleging that eBay entered into a per se unlawful "handshake" agreement with Intuit not to poach each other's employees. U.S. v. eBay, Inc., 12-cv-5859 (N.D. Cal. Nov. 16, 2012); and California v. eBay, Inc., 12-cv-5874 (N.D. Cal. Nov. 16, 2012). This lawsuit follows the DOJ's recent challenges to other high tech firms' hiring practices, which involved similar practices.1 The eBay case underscores the DOJ's ongoing commitment to challenge agreements that restrict competition at any level and its particular interest in the high tech area. This matter is notable because it appears to be proceeding toward litigation. Throughout this administration, the Antitrust Division has demonstrated a willingness and commitment to litigate matters that could not be resolved through settlement. Thus, it is possible that the courts will have an opportunity to consider DOJ's position concerning these types of agreements, which eBay has characterized as "an overly aggressive" application of the antitrust laws.


According to the DOJ complaint, from at least 2006 to 2009, high level executives of eBay and Intuit, including then CEO Meg Whitman and Intuit founder Scott Cook (who, incidentally, was also serving on eBay's board of directors at the time), agreed not to solicit each other's employees and, for a period of more than a year, eBay agreed not to hire Intuit employees (including where Intuit employees approached eBay on their own accord rather than through a recruiter) - "a truce in the war for talent' to protect their own interests at the expense of their employees." The DOJ views such conduct as per se unlawful under Section 1 of the Sherman Act, meaning that it is so inherently anticompetitive that it does not require any evidence of actual anticompetitive effects (e.g., reduced wages or benefits). eBay and Intuit are alleged to be direct competitors in the market for hiring specialized computer engineers and scientists, a business input considered to be uniquely critical to the success of high tech firms. Even after the DOJ's prior investigation into the hiring practices of other high tech firms (including Intuit) was made public, eBay and Intuit stuck by their agreement for at least some period of time.

In a statement accompanying the lawsuit, Acting AAG Joseph Wayland explained that "eBay's agreement...

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