Apple, Google and others to face former employees' antitrust suit

The companies are accused of making agreements not to poach one anothers' employees

A federal court in California has ordered seven technology companies -- including Apple, Intel, Adobe and Google -- to face a private antitrust suit from five former employees, who allege that the companies conspired to eliminate competition between them for skilled labor to suppress compensation and mobility of employees.

District Judge Lucy H. Koh of the U.S. District Court for the Northern District of California, San Jose division, ruled Wednesday that the plaintiffs' antitrust claims cannot be dismissed on the basis of implausibility, and that they have adequately pleaded antitrust injury as a result of six agreements among the companies.

Koh ruled on a joint motion by the defendant companies to dismiss the complaint filed under the Sherman Act and Cartwright Act antitrust laws.

The former employees, all software engineers, had charged that from 2005 to 2007 the defendants had entered into nearly identical "do not cold-call" bilateral agreements whereby each placed the employees of the other in a "do not cold-call" list with instructions to recruiters not to initiate contact with these employees.

In a properly functioning and lawfully competitive labor market, the companies listed as defendants would compete with one another for employees, and that competition could involve soliciting or "cold-calling" people who work for the other defendants, the plaintiffs said.

"The fact that all six identical bilateral agreements were reached in secrecy among seven Defendants in a span of two years suggests that these agreements resulted from collusion, and not from coincidence," Koh wrote in her 29-page order.

"For example, it strains credulity that Apple and Adobe reached an agreement in May 2005 that was identical to the 'Do Not Cold-Call' agreement Pixar entered into with Lucasfilm in January 2005," Koh added.

The seven companies were also investigated by the U.S. Department of Justice in connection with such activity; they settled in 2010. As part of the settlement, they admitted no wrongdoing but agreed not to ban cold-calling and not to enter into any agreements that prevent competition for employees.

It is reasonable to infer that such significant wide-ranging, companywide and worldwide policies would have been approved at the highest level, Koh said referring to the six agreements.

The suit includes a reference to the alleged role of Apple co-founder Steve Jobs in the agreements. For example, Jobs is alleged to have threatened Palm with litigation for not entering into a "do not cold-call" agreement, according to the plaintiffs. The conspiracy consisted of an interconnected web of express bilateral agreements, each with the active involvement and participation of a company under the control of the late Steve Jobs and/or a company whose board shared at least one member of Apple's board of directors, the plaintiffs said according to the court document.

John Ribeiro covers outsourcing and general technology breaking news from India for the IDG News Service. Follow John on Twitter at @Johnribeiro. John's email address is john_ribeiro@idg.com

Copyright © 2012 IDG Communications, Inc.

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