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From Antitrust Law Daily, May 1, 2014

eBay agrees to settle federal, California antitrust actions over no-poach agreement

By Jeffrey May, J.D.

Today, the U.S. Department of Justice and the California attorney general's office announced that eBay Inc. has pledged not to enter into or maintain agreements with other companies restraining employee recruitment and hiring to resolve the antitrust actions filed by the Department of Justice Antitrust Division and State of California in November 2012. In the state enforcement action, eBay will pay $250,000 in civil penalties and $3.5 million in restitution for the state and for employees or prospective employees affected by the challenged conduct. Both the proposed final judgment in the Justice Department suit and the state consent decree were filed with the federal district court in San Jose for approval (U.S. v. eBay Inc., Case No. 12-5869; State of California v. eBay Inc., Case No. 12-5874).

Both the federal complaint and the state complaint allege that, between 2006 and 2009, senior executives and directors of eBay and Intuit maintained an "no-poach" agreement that prevented each firm from recruiting employees from the other and that prohibited eBay from hiring Intuit employees that approached eBay. It was alleged that Meg Whitman, then eBay’s CEO, and Scott Cook, Intuit’s founder and executive committee chair, were involved in forming, monitoring, and enforcing the pact. In addition to a Sherman Act claim, the state alleges violations of the California Cartwright Act and Unfair Competition Law.

In September 2013, eBay's motion to dismiss the Justice Department suit was denied (2013-2 Trade Cases ¶78,530), but the court dismissed the state suit with leave to amend (2013-2 Trade Cases ¶78,531). eBay moved to dismiss California's Second Amended Complaint; however, that motion was terminated after California and eBay jointly stipulated to a stay the case in January of this year to pursue a settlement.

Proposed final judgment. The proposed final judgment—which, if approved by the court, would resolve the U.S. Justice Department suit—would prohibit eBay from entering or maintaining anticompetitive agreements relating to employee hiring and retention for five years. It would broadly prohibit eBay from entering, maintaining or enforcing any agreement that in any way prevents any person from soliciting, cold calling, recruiting, hiring or otherwise competing for employees. According to the Justice Department, eBay also will implement compliance measures tailored to these practices.

The settlement is substantially similar to settlements reached in antitrust actions against other high tech firms for antitrust violations arising from their hiring and recruiting practices. Intuit was not named as a defendant in the current federal complaint, because it was already subject to a March 2011 consent decree (2011-1 Trade Cases ¶77,483). That settlement also resolved charges against five other technology companies–Adobe Systems Inc., Apple Inc., Google Inc., Intel Corporation, Intuit Inc. and Pixar. A June 2011 consent decree (2011-1 Trade Cases ¶77,477) resolved similar U.S. charges against digital animation studio Lucasfilm, Inc.

State settlement. In addition to the conduct restrictions, the California settlement requires eBay to pay $3.5 million into a settlement fund, which will include $300,000 to the state for harm to its economy. This is the first time a state antitrust settlement has explicitly recovered additional funds for general harm to the economy, according to the California attorney general's office.

Of the $3.75 million, $2.375 million will be set aside as restitution for employees or prospective employees at eBay and Intuit who were affected by the agreement. Restitution payments will be made to three distinct pools of current and former employees: (1) approximately 40 individuals, who were employed by Intuit and considered for but not offered a position at eBay, will receive between $5,000 and $10,000 each; (2) approximately 950 individuals, who were employed by Intuit and applied for but were not offered a position at eBay, will receive between $1,000 and $1,500 each; and (3) current and former employees who did not apply for jobs at the other company but may have been indirectly affected by the challenged conduct will receive a maximum payment of $150.

The remaining $1.375 million of the $3.75 million monetary payment from eBay will be paid to California to satisfy eBay’s liabilities to the state and for attorney fees ($675,000) and claims administration costs ($150,000). eBay will pay $300,000 to satisfy claims by California that alleged eBay’s agreement has harmed the California economy. The state noted that eBay also will pay $250,000 in civil penalties.

Attorneys: N. Scott Sacks for U.S. Department of Justice. Nicole S. Gordon for State of California. Thomas P. Brown (Paul Hastings LLP) for eBay Inc.

Companies: eBay Inc.

MainStory: TopStory Antitrust AntitrustDivisionNews CaliforniaNews

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