Trusting Antitrust Law: Anti-Competitive Agreements in the Technology Industry

by Mayura Iyer, UMN Law Student, MJLST Staff

Recently, the District Court of the Northern District of California certified a group of plaintiffs as a FRCP 23(b)(3) class in the High-Tech Employee Antitrust Litigation case. This case is a consolidation of five underlying cases instituted by individual plaintiffs against Adobe Systems, Inc., and the class action is now taking on some of the biggest names in Silicon Valley, including Apple, Google, Intel, and Pixar.

The plaintiffs, a group including software and hardware engineers, programmers, and other employees of the high-tech industry, are relying on principles of antitrust law to show that their employers made unlawful, anti-competitive agreements. They are alleging that their employers engaged in a conspiracy to eliminate competition for skilled labor by entering into agreements with each other that prohibited them from poaching each other’s employees. Interestingly, all the companies involved were either associated with Steve Jobs, former Apple CEO, or shared at least one common director with Apple’s Board of Directors, suggesting a concerted effort among executives of these companies.

As a result of these agreements, wages for technical professionals like the plaintiffs have been artificially suppressed, since the employers have created a non-competitive environment for recruiting employees. With the class potentially including 64,000 plaintiffs, these companies are likely to settle. However, if any of these claims do go through to trial, the defendants will likely have large hurdles in their path, since there is electronic documentation of communications between executives acknowledging the existence and potential illegality of their gentlemen’s agreements.

These agreements have stifled competition within the technology industry by limiting the forces of the free market. The best talent was not allowed to be competitively recruited, thus devaluing those employees and consequently, likely suppressing innovation. Regardless of whether these cases are resolved through settlements or through trial, the fact that these back-door agreements have been brought to light is likely to change the landscape of the technology industry in a major way. Breaking the cycle of these anti-competitive practices will likely change the ways in which employees in this sector are recruited and compensated and perhaps will also encourage innovation and the transfer of ideas. While these companies will likely still be able to protect themselves through other safeguards such as non-compete clauses, perhaps now the scales of the technology industry will tip further towards equalizing the power between the employers and their most invaluable intellectual resources, their technical employees.