Presenting a live 75 ‐ minute webinar with interactive Q&A Avoiding Antitrust Violations In Avoiding Antitrust Violations In Employment Recruiting Leveraging Guidance on Non ‐ Solicitation Agreements from Recent DOJ Consent Decree THURS DAY, FEBRUARY 3, 2011 1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific T d Today’s faculty features: ’ f l f David T . Blonder, Counsel, Akin Gump Strauss Hauer & Feld , Washington, D.C. Logan M. Breed, Attorney, Hogan Lovells , Washington, D.C. Molly S . Boast, Deputy Assistant Attorney General for Civil Matters, U.S. Department of Justice, Antitrust Division , Washington, D.C. The audio portion of the conference may be accessed via the telephone or by using your computer's speakers. Please refer to the instructions emailed to registrants for additional information. If you have any questions, please contact Customer Service at 1-800-926-7926 ext. 10 .
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Antitrust Challenges in Employment Recruiting Strafford Publications Inc. February 3, 2011 Molly S. Boast, Logan M. Breed David T. Blonder Deputy Assistant Attorney Attorney Attorney General for Civil Matters Hogan Lovells Akin Gump Strauss Hauer & United States Department of logan.breed@hoganlovells.com Feld, LLP J Justice Antitrust Division ti A tit t Di i i 202 637 6407 202.637.6407 dbl dblonder@akingump.com d @ ki Molly.Boast@usdoj.gov 202.887.4023 202-353-4651
Overview of DOJ Enforcement Actions Overview of DOJ Enforcement Actions U.S. v. Adobe Systems, Inc., Apple Inc., Google Inc., Intel Corp., Intuit Inc Intuit, Inc., and Pixar (Sept. 24, 2010) and Pixar (Sept 24 2010) ● United States v. Lucasfilm Ltd. (Dec. 21, 2010) ● Represent continued effort to investigate and challenge under antitrust laws employment agreements and practices between competitors without p y g p p any procompetitive justification ● Consent Decrees provide significant guidance on avoiding potential antitrust violations in recruiting practices ● Reaffirm DOJ view that unilateral efforts and practices of companies will ● Reaffirm DOJ view that unilateral efforts and practices of companies will likely not attract DOJ antitrust scrutiny ● Enforcement actions are limited to facts and do not encompass all potential situations 5
US v. Adobe, et al. US v. Adobe, et al. Investigation focused on series of separate but similar bilateral agreements (5 in total) between 2005 and 2008 that Apple had with agreements (5 in total) between 2005 and 2008 that Apple had with Google, Adobe and Pixar, and that Google had with Intel and Intuit. Characteristics: ● Agreements directly and explicitly established by senior executives and ● Agreements directly and explicitly established by senior executives and companies implemented internal policies banning direct solicitation or “cold-calling” of employees ● Included “Do Not Call” lists and companies that were deemed “Off-Limits” ● Appeared to be intended toward recruitment of computer engineers and A d t b i t d d t d it t f t i d scientists or “highly skilled technical employees” but not limited by geography, job function, product group, or time period ● Complaints of breaches, and Executives and HR staff altered conduct to conform to terms of agreements f t t f t 6
US v Lucasfilm US v. Lucasfilm Restraint broader than Adobe – Practices more “pernicious” in the aggregate aggregate 3 Part Protocol restricting recruiting efforts between rival digital animation studios ■ Lucasfilm and Pixar agreed to not cold call the other firm s employees ■ Lucasfilm and Pixar agreed to not cold call the other firm’s employees ■ Agreed to notify each other when making an offer to employee of other firm ■ Agreed not to counter-offer above initial offer Companies agreed upon protocol, Pixar drafted terms of agreement and communicated terms to Lucasfilm and communicated terms to Lucasfilm Communicated to management and enforced through HR department 7
Prohibited Conduct Prohibited Conduct For 5 years following the entry of judgment: Parties cannot enforce existing agreements Parties prohibited from entering into or attempting to enter into non- solicitation agreement with any other person g y p Parties cannot request or pressure any other person to refrain from cold calling, soliciting, recruiting, or otherwise competing for employees of another person. 8
Compliance and Disclosure Obligations Compliance and Disclosure Obligations Compliance training and monitoring of relevant employees involved in recruitment efforts Filing of annual statement identifying and providing copies of certain types of permitted agreements, including ● Detailed descriptions regarding the circumstances of any known D t il d d i ti di th i t f k violations or potential violations known to any officer, director, human resources manager, or senior manager supervising recruitment efforts DOJ compliance inspections upon request, including inspection of documents and interviews of employees 9
Permitted Conduct Permitted Conduct Severance agreements g Reasonably necessary for, and ancillary to, legitimate procompetitive collaborations ● Merger and Acquisition activity, investments, including related due diligence activities ● Contracts with consulting services, outsourcing vendors, recruiting agencies and temporary or contract employees ● Settlements of legal disputes ● Settlements of legal disputes ● Contracts with resellers, OEMs and service providers ● Legitimate joint ventures or collaboration agreements For last 2, must identify agreement, be narrowly tailored, identify For last 2, must identify agreement, be narrowly tailored, identify participating employees to extent possible, have a reasonable termination date, and be signed. 10
Theory – Per Se Illegality under Sherman Act §1 Theory Per Se Illegality under Sherman Act §1 Buyer side “market allocation” of high tech employees Disrupted, but did not eliminate, normal state of competition for employee talent depriving affected employees of information and access to better job opportunities Agreements not related to or part of legitimate pro competitive Agreements not related to or part of legitimate pro-competitive collaboration or venture Simple “naked restraint” of trade, relying on past DOJ enforcement/judicial precedent: enforcement/judicial precedent: ● U.S. v. Ass’n of Family Practice Residency Doctors (1996) (DOJ per se challenge of no-solicitation in medical residency programs) ● U.S. v. Cooperative Theaters of Ohio (movie theater booking agents customer no solicitation agreement deemed per se violation as customer customer no-solicitation agreement deemed per se violation as customer allocation scheme) (6th Cir., 1988) ● U.S. v. Brown (agreement restricting competition for procurement of billboard leases) (9th Cir., 1991) 11
Parties’ Argument – Rule of Reason Should Apply Parties Argument Rule of Reason Should Apply No precedent for application of the per se rule to bilateral non- solicitation agreements solicitation agreements This is outside the narrow scope of conduct that, based on “considerable” judicial and economic experience, has been shown to have “no purpose except stifling of competition.” White Motor Co. v. United States, 372 U.S. 253 263 (1963) 253, 263 (1963) Courts have consistently applied the rule of reason to more restrictive no-hire agreements Bogan v Hodgkins 166 F 3d 509 515 (2d Cir 1999) Bogan v. Hodgkins, 166 F.3d 509, 515 (2d Cir. 1999) Nichols v. Spencer Int’l Press, Inc., 371 F.2d 332, 337 (7th Cir. 1967) Union Circulation Co. v. FTC, 241 F.2d 652, 657 (2d Cir. 1957) ( ) DOJ even recently acknowledged that non-solicitation agreements are subject to rule of reason treatment in a brief it submitted to the Supreme Court. See Brief for the United States as Amicus Curiae Supporting Petitioner at 20 & n 10 Am Needle Inc v Nat’l Football Supporting Petitioner, at 20 & n.10, Am. Needle, Inc. v. Nat’l Football League, No. 08-661 (U.S. Sept. 25, 2009). 12
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