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On September, 24, 2010, the Antitrust Division of the US Department of Justice ("the Division") announced that six firms – Adobe Systems Inc., Apple Inc., Google Inc., Intel Corp., Intuit Inc. and Pixar – had agreed to consent orders resolving charges that they had entered into illegal bilateral agreements not to "cold call" or solicit each other's employees. Each of the named firms allegedly had entered into separate agreements with either Apple or Google and high-ranking officials of each of the firms were alleged to have actively sought and enforced these agreements.
In some instances, the agreements were entered into between firms that were engaged in legitimate and procompetitive joint ventures. However, the no-solicitation agreements allegedly were not limited to the employees involved in the joint venture or collaboration. The Division concluded that these broad restrictions on solicitation were not "ancillary" to the joint collaborations involved and thus should be treated as naked restraints of trade and deemed per se unlawful under Section 1 of the Sherman Act.
Common board memberships or other "generalized relationships" also were deemed insufficient to justify broad no-solicitation agreements.
The Final Judgments to be entered in these cases at the conclusion of the Tunney Act process broadly prohibit the defendants from entering into any no-solicitation agreements. However, the Final Judgments also carve out certain situations in which no solicitation agreements are "not prohibited." More particularly, such clauses are permitted if they apply only to employees engaged in legitimate collaborative business activities such as technology integration, joint ventures, consulting relationships, vendor-vendee relationships, and merger agreements. Narrowly tailored no-solicitation provisions in employment or severance agreements are also permitted.
Defendants are required to specify the business agreement to which the no-solicitation provision is ancillary, the term of years for which the no-solicitation provision will be in effect and also, "with reasonable specificity" the employees who are subject to that provision.
Antitrust limitations applicable to agreements restricting the hiring of another firm's employees have received only sporadic enforcement attention prior to this investigation. We recommend that our clients review existing "no call" lists and antitrust compliance procedures in light of the Division's view of the law and attention to this type of conduct.
The press release announcing these enforcement actions stated, "The division continues to investigate other similar no solicitation agreements."
See DOJ materials: Justice Department Requires Six High Tech Companies to Stop Entering Into Anticompetitive Employee Solicitation Agreements and U.S. v. Adobe, et al.
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