The Hiring Monopsony Cartel in Silicon Valley: Live from La Farine CXXVII: March 26, 2014
David Streitfeldfeb: Engineers Allege Hiring Collusion in Silicon Valley: "A class-action lawsuit that accuses industry executives of agreeing between 2005 and 2009 not to poach one another’s employees.
Headed to trial in San Jose this spring, the case involves 64,000 programmers and seeks billions of dollars in damages. Its mastermind, court papers say, was the executive who was the most successful, most innovative and most concerned about competition of all--Steve Jobs....
The actions described in the suit were first uncovered in an investigation by the Justice Department, which concluded with an antitrust complaint against a half-dozen companies. In a simultaneous settlement, the companies agreed to drop the no-poaching practice. The settlement did not preclude the programmers from pursuing their own case against the companies, and the class-action lawsuit quotes emails and other communications from some of Silicon Valley’s biggest names....
Google and Mr. Jobs soon came to an informal agreement not to solicit each other’s employees. Apple made similar deals with other companies. So did Google. By 2007, when a Google recruiter slipped up and contacted an Apple engineer, Mr. Jobs immediately complained. To appease the Apple chief, Google fired the recruiter within an hour. Mr. Jobs’s control extended even to former Apple engineers. When Google wanted to hire some, the suit says, Mr. Jobs vetoed the idea.... Eric E. Schmidt, then Google’s chief executive, said he preferred that the company’s Do Not Call list be shared orally, according to court papers, “since I don’t want to create a paper trail over which we can be sued later.”...
In a similar vein, an Intel recruiter asked Paul S. Otellini, the company’s chief executive, about a hands-off deal with Google. “We have nothing signed,” Mr. Otellini responded in an email. “We have a handshake ‘no recruit’ between Eric and myself. I would not like this broadly known.”
The origins of the conspiracy, according to the lawsuit, date back to the 1980s, when the filmmaker George Lucas sold part of his company to Mr. Jobs. “We cannot get into a bidding war with other companies because we don’t have the margins for that sort of thing,” Mr. Lucas is quoted as saying in the court papers. So Lucasfilm and what was to become Pixar made a deal that there would be no cold-calling, that they would notify each other when offering a job to an employee and that any offer was final and would not be improved in response to a counteroffer. What worked for Pixar would work for Apple, Mr. Jobs decided....
The Justice Department is currently pursuing a case against eBay, accusing it of having an illegal no-poaching deal with Intuit. An eBay spokeswoman said the company was in settlement talks....
Only one Silicon Valley executive appears to have resisted Mr. Jobs’s threats and blandishments. In the summer of 2007, Palm Inc., a maker of hand-held devices, hired Jonathan J. Rubinstein, a highly respected former Apple executive who played a key role in developing the iPod. Apple engineers were clamoring to work with him. Mr. Jobs proposed a no-poaching deal to Edward T. Colligan, Palm’s chief executive. Mr. Colligan responded that such a deal would be unfair to employees as well as “likely illegal.” Mr. Jobs then threatened to unleash Apple’s patent lawyers on Palm. A patent suit “certainly had the potential for creating some havoc,” Mr. Colligan said in an interview. But he said he felt it was important not to bend.
“A lot of times you’re confronted with things that may be advantageous, but you have to make the critical decision that morally, it is not right,” he said, noting that Apple never did sue. “Unfortunately, this does not happen as often as it should.”
