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Tech companies settle DOJ hiring inquiry

- Associated Press - Friday, September 24, 2010

WASHINGTON (AP) - The Justice Department has reached an agreement with six major Silicon Valley companies to settle allegations that they colluded to stifle competition for employees by restricting the way they could poach workers from each other.

The settlement, filed in the U.S. District Court for the District of Columbia late Friday, names Google Inc., Apple Inc., Intel Corp., Adobe Systems Inc., Intuit Inc. and Walt Disney Corp.'s Pixar Animation Studios.

The Justice Department had been investigating whether the companies pledged not to use "cold calls" to recruit each other's employees, as part of partnership agreements. The government was concerned that such promises amounted to a form of collusion to avoid bidding wars for employees with specialized skills, and in turn hold down payroll expenses.

These agreements, the Justice Department said, "eliminated a significant form of competition to attract highly skilled employees," depriving employees of access to better job opportunities.

The settlement bars the companies from entering into such "no-solicitation agreements" for employees for a period of five years.

In court documents, the Justice Department cited various partnership agreements among the companies from 2005 through 2007 in which both sides agreed not to make unsolicited job offers to computer scientists, engineers and other workers with specialized skills.

Although the companies argued the restrictions had little effect on their hiring practices, they evidently believed the rules helped them retain employees.

For instance, in February 2006 and again in March 2007, Apple complained to Google about apparent breaches of their mutual cold-calling restrictions, the Justice Department alleged in court documents. Google CEO Eric Schmidt joined Apple's board in August 2006 and remained a director until last year when he stepped down because of escalating competition between the companies.

Friday's court filing didn't elaborate on how Google resolved Apple's complaint.

Apple also forged a no cold-calling agreement in 2007 with Pixar, a company formerly run by Apple CEO Steve Jobs. Pixar was sold in 2006 to Walt Disney Co. in a deal that landed Jobs a seat on Disney's board of directors and made him the company's largest shareholder.

Apple and Pixar did not return calls seeking comment about their arrangement or the settlement.

Adobe agreed not to cold call Apple's employees because it feared Apple would raid Adobe's payroll more aggressively if it didn't consent to the restrictions, according to the DOJ.

Amy Lambert, Google's associate general counsel for employment, said in a blog post Friday that the company does not believe its "no cold call" policies hindered hiring or affected wages, and noted that Google hired hundreds of employees from partner companies named by the Justice Department even while these policies were in place.

Google nonetheless abandoned the policy in late 2009 once the Justice Department began its investigation, she said.

In a statement, Intel spokesman Chuck Mulloy said, "Intel does not believe its actions violated the law, nor does the company agree with the allegations. The company is settling the matter because it believes it would not harm the company or its ability to do business."

Intuit general counsel Laura Fennell said in a statement that the company does not believe it did anything wrong.

"We do not intend to enter into the types of broad non-solicit agreements that are prohibited by the settlement," Fennell said. "The terms of the settlement will not have a significant impact on our business, so we have decided to resolve this matter."

Adobe spokeswoman Holly Campbell said in a statement that Adobe's recruiting policies have been consistent with antitrust laws. The company settled to avoid the costs and distraction of litigation, she said.

Technology companies argue that restrictions on contacting each other's employees encouraged partnerships that spurred economic growth and fostered more innovation. The Justice Department cast doubt on this contention, asserting in court documents that the cold-calling restrictions weren't made as part of any "legitimate collaboration."

If the settlement discourages future alliances, "it could do more harm than good for the economy," said Thomas Lenard, president of the Technology Policy Institute, a think tank that gets some of its money from Google, Intel and Intuit.

It's unlikely the cold-calling prohibition held down wages because "it was a fairly weak provision," Lenard added. "It wasn't a 'do-not-hire' or 'do-not-talk-to-our-employees' restriction."

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AP Technology Writers Jordan Robertson in San Jose, Calif., and Michael Liedtke in San Francisco contributed to this report.

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