Report: Tech Giants Targeted In DOJ Probe

Apple, Google and Yahoo are among the tech giants being investigated by the Justice Department for possible antitrust violations related to negotiations over the recruiting and hiring of one another's employees, according to a Washington Post report.

The review is said to be "industry-wide" and in preliminary stages, according to the report, which cited two unnamed sources. Companies that agree not to hire away talent could be stifling competition, the report noted.

Representatives for Apple, Google and Yahoo, as well as the Department of Justice, did not immediately respond to requests for comment.

Tech companies, known for their exhaustive recruiting efforts, have waged fierce battles to maintain top talent. In one closely watched case, Google was sued by Microsoft in 2005 over Google's decision to hire Kai-Fu Lee away from Microsoft to run Google's research operation in China. The two parties eventually settled out of court.
IBM has proved particularly territorial about departing executives. Last month, the company filed a lawsuit in federal court to prevent its former head of mergers and acquisitions, David Johnson, from joining Dell, saying it would be a violation of his contract.

Last year, IBM sued Mark Papermaster to keep him from joining Apple. The lawsuit claims were nearly identical, with IBM charging that Papermaster's joining Apple would cause him to divulge trade secrets and was a violation of the non-compete clause to which he agreed. after three months, and Papermaster finally started working at Apple three months after that.

By Steven Musil
©2009 CBS Interactive Inc. All rights reserved

[au_fait]

When did ethic die? if someone signs a contract stating I will not work for the company in a similar field, then it is done. It irks me to see people crying after they leave a company that they cannot go work for the competition. You signed your contract and now you want out, F off! Either that or have the new company buy your contract. This is one fight the government should keep their slimy hands out of. As for hiring the competitions key players, well that is what buyouts are for. If you did not negotiate a contract that benefitted yourself, well that is your problem.

[brianbwb-2009]

"...These are valid contracts generally -- you are allowed to give up your "right to work" in return for some benefit like a cash payment...." Posted by mitdgreenb

I understand your point, but if there is such a concept as a 'right to work", that "right" then should be stipulated in law, and if it is, then it becomes relevant to note that rights are not "for sale", and any contract that requires a violation of a given right, is therefore illegal.

If it is not stipulated in law, then there is no "right to work".

[brianbwb-2009]

Posted by tmittelstaed


Excuse the spelling errors, it is 2:40 am where I am.

[brianbwb-2009]

Posted by tmittelstaed

I am a musician, but also a programmer, having learned assembler on the old Motorola 6500, which indicates how long I have been at it, but I don't and won't work for a company.

I use my skill to dissassemble stuff I use, and make it more efficient, and I do not sell the end product, it is customized for me alone. I will not say here which software I have thus re-engineered, but suffice it to say my DAW runs rings around even kilo-buck "pro tools" rigs.

Of a truth, the skill most valuable for a code jock is a penchant for tedium, algorythns and modules need only be "plugged in", no one is "discovering" anything more efficient, or unpresedented. I say that judging from the code I have encountered, what most programmers are turning out is nowhere near worth the money they are being paid.

I do think that paying code jocks big bucks to turn out the spaghetti code I see regularly is just a tool to justify paying the management of these companies even more, after all what boss earns less than the employees?

This is why MS and Apple are both dying, the management regularlt shoots itself in the foot, by issuing new versions of the OS that breaks expensive third-party products, which they themselves don't sell.

We will soon see them also begging for bailouts, but if we give them, it should be under the condition that their OS become public domain, they, just like the auto industry, have made enough from selling, and suing over their faulty product.

[mitdgreenb]

I generally agree with tmittelstaed, but I'd add a little color. (BTW I know one of the people mentioned in the article.)

As tmittel said, most of these folks are iconoclastic -- that's what makes them valuable -- so, by nature, they look to work on the next new, cool thing. It's difficult to keep them at a company.

I disagree on tmittel's comment on options. Options are an excellent way to keep people in small, growing companies because the options are extremely valuable. But options are next to worthless in the big companies that were mentioned. This is primarily because options pay out best where there is growth. 100% growth in $1M company means getting to $2M. 100% growth in IBM means going from $100B to $200B. Not so easy. Another reason options are not worth anything in a big company is that an individual can have so little impact... a $100M man in a $100M company is everything but a $100M man in IBM is a rounding error... and that goes against the personality type of interest here. And, finally, while many of these big companies talk big about being innovative, they are limited by brand value concerns and other concerns on just how much risk they can take... again against the grain for these people.

The alternative is salary (i.e., price). This is what big companies use because they have cash. Bidding wars are common and salary, once paid, offers no loyalty. Therefore big companies deploy noncompete clauses in return for signing bonuses or other benefits. These are valid contracts generally -- you are allowed to give up your "right to work" in return for some benefit like a cash payment.

Undoubtedly, the DoJ is looking at explicit versus implicit collusion. If Coke calls Pepsi and says, "I'll keep my price at $1.69 if you do," it's explicit and illegal. If Coke advertises to the world that "We're keeping our price at $1.69 for the next two months so you have certainty in these economic times", it's called "market signaling" and Pepsi can then keep its price steady too. This is generally legal. The same goes for salaries: if the companies signal each other that they will enforce noncompetes, it's implicit collusion and perhaps not illegal. But if people at the companies were stupid, there will be explicit smoking guns.

[Oregon_State_OSU]

AT&T is the company that needs to be investigated.

The WORST COMPANY ON THE PLANET is AT&T.

[tmittelstaed]

This really has nothing to do with that. Instead, speaking as one of these high tech key employees, it is because of the very nature of the work that we do.

Modern technology is so complex that no one single person could possibly write a software program, or design a piece of hardware, or build a network or complex management system, simply because there is just so much specialized work to do. However, you cannot just throw a bunch of people into a room and expect that they will organize themselves into a team. Instead there is always one key individual who is able to gather all of the work together that the others do, or gather all the products together that are available on the market, and create a combination of these other bits of work, or other products, that is worth much more as a single whole than the bits are together.

For example, you can pile up 5 computers each worth about $400, and a bunch of miscellaneous networking cable and gear worth perhaps $400 and have a total of $2000 invested in gear. But, untl the key person comes along and assembles the pieces into, say, an Internet Cafe, all you have is $2K worth of hardware. But, once that Internet Cafe exists, it is worth much much more than $2K. The same principle applies to software modules, or silicon chips, or whatever.

Anyway, high tech businesses have been at a complete loss in how to deal with these key people since the business exploded in the laste 70's. Traditional companies that have the same problem handle it by awarding a lot of stock to the key people to get them to have a vested interest in the company, and in sticking around. The problem with high tech, though, is that the very value of the stock of the high tech company is the employees - and if the employees decide they want to leave, the company stock is worthless. As a result, while the industry has tried to get buy-in from employees via stock options, that has proven to not work. Instead, key employees in high tech pretty much all simply want high salaries. And most key employees of high tech companies don't have much loyalty - after all, their entire personality type is that of the person who is a visionary and doesn't follow the same beaten path everyone else does, after all. that is what makes them valuable.

So, pretty much what happens in high tech is the key people get tired of working for a company, and get bored with it, and want to go elsewhere, this happens all the time. And since they are so valuable, they can usually get a salary increase when they leave and go to the next employer. It doesn't take rocket science to understand that if you own a high tech company that's value is dependent on a few key engineers, your likely going to want to do what you can to keep them from leaving.

What the DoJ found is that some of these company owners have been secretly colluding to do the following - I'll agree to not hire one of your engineers who come to me for a job, if you agree to not hire one of my engineers who is coming to you for a job. That is what they want to put a stop to.

[hdc77494]

I thought California law prevented companies from using employment clauses that would prevent contract employees from working.elsewhere, i.e., it's illigal to draft a contract that would prevent someone from working for their employer of choice should they choose to leave the current employer. The only shot they would have is if they can be forced to sign away that right in an employment contract. Someone tell me if I'm wrong.