U.S. v. Adobe, Inc. No. 1:10-cv-01629 (D. D.C. 9/24/10) )[1]

PROCEDURAL POSTURE

Motion by Plaintiff United States for entry of consent judgment prohibiting Defendants from entering non-solicitation agreements regarding employees. The United States had filed a civil complaint charging the defendants with violations of the Sherman Act, 15 U.S.C. §1. The government's press release notes that the action arose from a larger, ongoing investigation into employment practices of high-tech firms.

FACTS

Beginning in approximately May 2005, Apple and Adobe entered an agreement through which they agreed not to solicit each other's employees through "cold calling." The agreement was made and enforced by senior executives of both companies, and enforced through written directives and the maintenance of "do not call" lists. The agreement also was enforced through internal investigations of alleged violations of the no-solicitation provisions. The agreement was not limited to particular categories or geographic locations of employees. Within a year, Apple entered into a similar agreement with Google, and, by April 2007 negotiated for a similar agreement with Pixar. Meanwhile, Google entered into similar no-solicitation agreements with Intuit and Intel.

The United States filed a civil suit for injunctive relief, alleging that the no-solicitation agreements constituted per se unlawful restraints of trade between horizontal competitors in violation of the Sherman Act, 15 U.S.C. §1. The parties negotiated and tendered a consent Final Judgment, which may become effective if the government does not withdraw its consent during a 60-day comment period which began on September 24, 2010, and may expire by approximately November 23, 2010.

REASONS FOR DECISION

The government alleged that the no-solicitation agreements constituted per se unlawful restraints of trade between horizontal competitors, in violation of the Sherman Act, 15 U.S.C. §1. The government alleged that the agreements were per se unlawful because they were not ancillary to any legitimate collaborative venture of the competitors; extended to all employees at the firms; and were not limited by geography, job function, product group, or time period. The government also alleged that the agreements were not reasonably necessary because Defendants had collaborated with other companies without similar agreements, or with agreements containing more narrowly focused hiring restrictions.

The government's proposed consent judgment prohibits Defendants (including all others in active concert or participation with any Defendant with notice of the proposed judgment), from agreeing, or attempting to agree, with another person to refrain from cold calling, soliciting, recruiting, or otherwise competing for employees of the other person. It also prohibits each Defendant from requesting or pressuring another person to refrain from cold calling, soliciting, recruiting, or otherwise competing for employees of the other person. The proposed consent judgment does not prohibit "no direct solicitation provisions" that are ancillary to legitimate pro-competitive collaborations.

Lastly, the proposed final judgment includes mandatory notice and compliance provisions. For a period of five years from entry of Final Judgment, each Defendant must provide copies of the Final Judgment and annual briefings to its officers, directors, human resource managers, and senior managers who supervise employee recruiting. Each Defendant also must provide its employees with reasonably accessible notice of the existence of all agreements covered by the Final Judgment, and must file annually a statement identifying any agreement covered by, and describing any violation or potential violation of, the Final Judgment known to any officer, director, human resources manager, or senior manager who supervises employee recruiting, solicitation, or hiring efforts. If one of these persons learns of a violation or potential violation of the Final Judgment, the Defendant must take steps to terminate or modify the activity to comply with the Final Judgment and maintain all documents related to the activity.

DISCUSSION

This case is consistent with prior law in the area of restraints on labor markets, as well as claims of alleged per se violations based upon no-solicitation agreements U.S. v. Ass'n of Family Practice Residency Doctors, No. 96-575-CV-W-2 (W.D. Mo. May 28, 1996). See also, U.S. v. Brown, 936 F.2d 1042 (9th Cir. 1991) (affirming criminal conviction for conspiracy to restrict bidding for billboard leases); U.S. v. Cooperative Theaters of Ohio, Inc., 845 F.2d 1367 (6th Cir. 1988) (non-solicitation agreement among theater booking agents). In each case, the government alleged that the agreement resulted in per se unlawful market allocation among horizontal competitors. This case is perhaps interesting because of the breadth of its labor market definition. The relevant product/service market apparently included all "specialized computer scientists and computer engineers," and the geographic market appeared to be the United States generally. It also is another extension of the government's antitrust scrutiny to non-wage/price restraints in labor markets. The "do not call" agreements appear to have stemmed largely from a valid ancillary purpose - joint ventures where the competitors were collaborating, and wanted to assure that valuable personnel were not raided by the other partner. But the complaint alleged that the no-raiding agreements expanded beyond that limited purpose to cover virtually all aspects of the core businesses.

PRACTICE POINTER

Courts are beginning to address situations where working conditions of skilled workers either are not subject to a collective bargaining agreement, or where allegedly anticompetitive practices exceed the scope of a collective bargaining agreement. E.g., Fleischman v. Albany Medical Center, No. 1:06-cv-00765 (N.D.N.Y.) (alleged antitrust conspiracy to depress nurses' wages in the Albany, NY area; class certified July 2008 and renewed motion for summary judgment denied July 2010); Cason-Merenda v. Detroit Medical Center, No. 2:06-cv-15601 (E.D. Mich.) (summary judgment denied March 2009). Particularly in non-union settings, employers may wish to review their collaboration and information-sharing practices to avoid possible allegations of unlawful collusion.