DOJ Pursues Antitrust Claims Against Companies That Agree With Competitors Not to Recruit One Another's Employees

In an article published in yesterday’s New York Law Journal (December 22, 2010, New York Law Journal, p.4 (col. 4), Nonhire Agreements as Antitrust Violations), we discuss a complaint filed in September 2010 by the Department of Justice ("DOJ") against Adobe Systems, Inc., Apple Inc., Google Inc., Intel Corporation, Intuit, Inc., and Pixar, which alleges that those companies entered into various bilateral agreements in which they agreed not to actively solicit each other’s highly skilled technical employees, and that those agreements violated Section 1 of the Sherman Act, 15 U.S.C. § 1. Calling such agreements “facially anticompetitive,” the DOJ alleged that such concerted behavior both reduced the companies’ ability to compete for employees and disrupted the normal price-setting mechanisms that apply in the labor arena. At the same time that it filed the Complaint, the DOJ filed a proposed Final Judgment, Stipulation and Competitive Impact Statement, effectively announcing the settlement of its claims, by which the defendant companies would agree to refrain from entering into similar agreements in the future.

On December 21, 2010, the DOJ filed a similar complaint against Lucasfilm Ltd., alleging that company agreed with Pixar to restrict certain employee recruiting practices. The DOJ also filed a Competitive Impact Statement in the Lucasfilm matter, in connection with a proposed settlement that would restrict Lucasfilm from agreeing with any person to refrain from cold-calling, soliciting, recruiting or otherwise competing for the employees of the other person.

Legal practitioners thus should be aware that a corporate client entering into mutual non-solicitation and non-hire agreements with certain competitors, seeking relief from those competitors’ efforts to recruit away its employees, could expose the company to unwanted interest and even prosecution by governmental authorities under the antitrust laws. In most cases, particularly for large, high-profile corporate clients operating in a concentrated market, this quick fix should be avoided. There are a few legitimate business reasons that could support a “no direct solicitation provision,” and these are discussed further in our New York Law Journal article on the prior DOJ suit.