[Federal Register Volume 79, Number 93 (Wednesday, May 14, 2014)]
[Notices]
[Pages 27639-27650]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-11056]
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DEPARTMENT OF JUSTICE
Antitrust Division
United States v. Ebay Inc.; Proposed Final Judgment and
Competitive Impact Statement
Notice is hereby given pursuant to the Antitrust Procedures and
Penalties Act, 15 U.S.C. 16(b)-(h), that a proposed Final Judgment,
Stipulation and Competitive Impact Statement have been filed with the
United States District Court for the Northern District of California in
United States of America v. eBay Inc., Civil Action No. 12-5869. On
November 16, 2012, the United States filed a Complaint alleging that
eBay Inc. entered into an agreement with Intuit, Inc., that restrained
the recruiting and hiring of high technology workers, in violation of
Section 1 of the Sherman Act, 15 U.S.C. 1. The proposed Final Judgment
prevents eBay from maintaining or entering into similar agreements.
Copies of the Complaint, as amended, Stipulation, proposed Final
Judgment and Competitive Impact Statement are available for inspection
at the Department of Justice, Antitrust Division, Antitrust Documents
Group, 450 Fifth Street NW., Suite 1010, Washington, DC 20530
(telephone: 202-514-2481), on the Department of Justice's Web site at
http://www.usdoj.gov/atr, and at the Office of the Clerk of the United
States District Court for the Northern District of California. Copies
of these materials may be obtained from the Antitrust Division upon
request and payment of the copying fee set by Department of Justice
regulations.
Public comment is invited within 60 days of the date of this
notice. Such comments, including the name of the submitter, and
responses thereto, will be posted on the U.S. Department of Justice,
Antitrust Division's internet Web site, filed with the Court and, under
certain circumstances, published in the Federal Register. Comments
should be directed to James J. Tierney, Chief, Networks and Technology
Enforcement Section, Antitrust Division, Department of Justice,
Washington, DC 20530, (telephone: 202-307-6640).
Patricia Brink,
Director of Civil Enforcement.
N. Scott Sacks, Attorney (D.C. Bar No. 913087)
Jessica N. Butler-Arkow, Attorney (D.C. Bar No. 430022)
Adam T. Severt, Attorney (Member, Maryland Bar, Numbers not assigned)
Ryan Struve, Attorney (D.C. Bar No. 495406)
Anna T. Pletcher, Attorney (California State Bar No. 239730)
United States Department of Justice, Antitrust Division, 450 Fifth
Street NW., Suite 7100, Washington, DC 20530, Telephone: 202-307-6200,
Facsimile: 202-616-8544, Email: [email protected]
[Additional counsel listed on signature page]
Attorneys for Plaintiff United States of America
UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF CALIFORNIA
SAN JOSE DIVISION
UNITED STATES OF AMERICA, Plaintiff, v. EBAY, INC., Defendant.
Case No. 12-CV-05869 EJD
Amended Complaint
The United States of America, acting under the direction of the
Attorney General of the United States, brings this civil antitrust
action to obtain equitable relief against Defendant eBay, Inc.
(``eBay''), alleging as follows:
Nature of the Action
1. This action challenges under Section 1 of the Sherman Act a no-
solicitation and no-hiring agreement between eBay and Intuit, Inc.
(``Intuit''), pursuant to which eBay and Intuit agreed not to recruit
each other's employees and eBay agreed not to hire Intuit employees,
even those that approached eBay for a job. This agreement harmed
employees by lowering the salaries and benefits they might otherwise
have commanded, and deprived these employees of better job
opportunities at the other company. Meg Whitman, then the CEO of eBay,
and Scott Cook, Founder and Chairman of the Executive Committee at
Intuit, were intimately involved in forming, monitoring, and enforcing
this anticompetitive agreement.
2. Senior executives at eBay and Intuit entered into an evolving
``handshake'' agreement to restrict their ability to recruit and hire
employees of the other company. The agreement, which was entered into
no later than 2006, prohibited either company from soliciting one
another's employees for employment opportunities, and, for over a year,
prevented at least eBay from hiring any employees from Intuit at all.
The agreement was enforced at the highest levels of each company.
3. The agreement reduced eBay's and Intuit's incentives and ability
to compete for employees and restricted employees' mobility. This
agreement thus harmed employees by lowering the salaries and benefits
they otherwise would have commanded, and deprived these employees of
better job opportunities at the other company.
4. This agreement between eBay and Intuit is a naked restraint of
trade that is per se unlawful under Section 1 of the Sherman Act, 15
U.S.C. 1. The United States seeks an order prohibiting any such
agreement and other relief.
Jurisdiction and Venue
5. eBay hires specialized computer engineers, scientists, and other
employees throughout the United
[[Page 27640]]
States, and sells products and services throughout the United States.
Such activities, including the recruitment and hiring activities at
issue in this Complaint, are in the flow of and substantially affect
interstate commerce. The Court has subject matter jurisdiction under
Section 4 of the Sherman Act, 15 U.S.C. 4, and under 28 U.S.C. 1331 and
1337 to prevent and restrain the Defendant from violating Section 1 of
the Sherman Act, 15 U.S.C. 1.
6. Venue is proper in this judicial district under Section 12 of
the Clayton Act, 15 U.S.C. 22, and under 28 U.S.C. 1391(b)(2), (c).
eBay transacts or has transacted business in this district and has its
principal place of business here. A substantial part of the events that
gave rise to this action occurred here.
Intradistrict Assignment
7. Venue is proper in the San Jose Division because this action
arose primarily in Santa Clara County. Civil L.R. 3-2(c), (e). A
substantial part of the events that gave rise to the claim occurred in
Santa Clara County, and eBay has its principal place of business in
Santa Clara County. Judge Koh in the San Jose Division is currently
presiding over a case that is similar in certain respects. In addition,
the Attorney General of the State of California is filing a Complaint
that is related to the United States' Complaint, pursuant to the
requirements of Local Rule 3-12(a).
Defendant
8. eBay is a Delaware corporation with its principal place of
business in San Jose, California.
Co-Conspirators
9. Various other corporations and persons not made defendants in
this Complaint, including Intuit and senior executives at Intuit and
eBay, participated as co-conspirators in the violation alleged and
performed acts and made statements in furtherance of the violation
alleged. Intuit is not named as a defendant in this action because
Intuit is subject to a court order in United States v. Adobe Systems,
No. 10-01629 (D.D.C. judgment entered Mar. 17, 2011), barring it from
entering into or enforcing any agreement that improperly limits
competition for employee services.
Trade and Commerce
10. Firms in the same or similar industries often compete to hire
and retain talented employees. This is particularly true in technology
industries in which particular expertise and highly specialized skills
sought by one firm can often be found at another firm. Solicitation of
skilled employees at other companies is an effective method of
competing for needed employees. For example, Beth Axelrod, eBay's
Senior Vice President for Human Resources at the time the agreement
with Intuit was in effect, co-authored a book, ``The War for Talent,''
which emphasizes the importance of ``cold-calling'' as a recruitment
tool: ``The recruiting game is changing for yet another reason: It's no
longer sufficient to target your efforts to people looking for a job;
you have to reach people who aren't looking.''
11. eBay's agreement with Intuit eliminated this competition. The
agreement harmed employees by reducing the salaries, benefits, and
employment opportunities they might otherwise have earned if
competition had not been eliminated. The agreement also misallocated
labor between eBay and Intuit--companies that drove innovation based in
no small measure on the talent of their employees. In a well-
functioning labor market, employers compete to attract the most
valuable talent for their needs. Competition among employers for
skilled employees may benefit employees' salaries and benefits, and
facilitates employee mobility. The no-solicitation and no-hiring
agreement between Intuit and eBay distorted this competitive process
and likely resulted in some of eBay's and Intuit's employees remaining
in jobs that did not fully utilize their unique skills. Ms. Axelrod and
her co-authors described how the ``structural forces fueling the war
for talent'' have resulted in power ``shift[ing] from the corporation
to the individual,'' giving ``talented individuals . . . the
negotiating leverage to ratchet up their expectation for their
careers.''
12. Instead of working harder to acquire this critical and scarce
talent, eBay and Intuit called a truce in the ``war for talent'' to
protect their own interests at the expense of their employees. eBay
initially sought a limited no-solicitation agreement aimed at high-
level executives. eBay ultimately agreed to an expansive no-
solicitation and no-hire agreement in large part to placate Intuit's
Mr. Cook, who was serving as a member of eBay's Board of Directors and
who, at the same time, was making several complaints on behalf of
Intuit about eBay's hiring practices. eBay elevated the interests of
Mr. Cook above the welfare of its own employees. Similarly, Mr. Cook
was willing to sacrifice the welfare of Intuit's employees in order to
advance his own personal interests in serving on eBay's Board.
13. Neither eBay nor Intuit publicly announced their no hire/no
solicit agreement or ensured that all potentially affected employees
were aware of the agreement. Disclosure of the agreement could have
created substantial legal problems for eBay and Intuit under California
law and significant embarrassment for the executives and other
individuals who entered into, and monitored compliance with, the
agreement on behalf of the two firms. Many eBay and Intuit employees
reside in California, a state with a strong public policy prohibiting
firms from restricting employee movement by, among other things,
barring employers from enforcing ``no compete'' agreements. California
law provides that ``every contract by which anyone is restrained from
engaging in a lawful profession, trade, or business of any kind is to
that extent void.'' California Business & Professions Code Sec. 16600.
The Unlawful Agreement
14. Beginning no later than 2006, and lasting at least until 2009,
Intuit and eBay maintained an illegal agreement that restricted their
ability to actively recruit employees from each other, and for some
part of that time, further restricted eBay from hiring any employees
from Intuit. As alleged in more detail below, this agreement was
entered into and enforced at the most senior levels of these two
companies.
15. In November 2005, eBay's Chief Operating Officer, Maynard Webb,
wrote to Scott Cook, Intuit's Founder and Chairman of its Executive
Committee, to ``get [Mr. Cook's] advice on a specific hiring situation
and then see if we could establish some guidelines on an ongoing
basis.'' Mr. Webb asked Mr. Cook for ``permission to proceed'' with
hiring an Intuit employee who had contacted eBay regarding a job, and
then proposed a ``structure'' to Mr. Cook for future situations,
whereby eBay would ``not actively recruit from Intuit.'' Under Mr.
Webb's proposal, for Intuit candidates ``below Senior Director level''
who contacted eBay regarding employment, eBay would be permitted to
hire them and would give Intuit ``notice'' only after a candidate
accepted a job offer. For Intuit candidates ``at Senior Director level
or above,'' eBay would not make an offer unless Intuit was notified in
advance. Mr. Cook rejected this proposal insofar as it allowed hiring
of any employees without prior notice to Intuit, saying that ``we don't
recruit from board companies, period'' and ``[w]e're passionate on
this.'' In other words, because Mr. Cook served on eBay's board, Intuit
employees should be
[[Page 27641]]
denied any chance to work for eBay. Mr. Cook committed that Intuit
would not make an offer to anyone from eBay without first notifying
eBay, and said ``[w]e would ask the same.''
16. A month later, in December 2005, Meg Whitman, the CEO of eBay
at the time, and Mr. Cook discussed the competition for two employees
with an eye toward eliminating that competition altogether. As Ms.
Whitman told Ms. Axelrod, Mr. Cook was ``slightly miffed by our recent
hire of two Intuit executives.''
17. No later than August 2006, the initial agreement between eBay
and Intuit restricting the hiring of each other's employees was put
into effect. In August 2006, when eBay considered hiring an Intuit
employee for an opening at its PayPal subsidiary, Ms. Axelrod said that
while she was ``happy to have a word with Meg [Whitman] about it,'' Ms.
Axelrod was ``quite confident she will say hands off because Scott
[Cook] insists on a no poach policy with Intuit.'' When the PayPal
executive asked Ms. Axelrod to confer with Ms. Whitman, Ms. Axelrod
reported back that ``I confirmed with Meg [Whitman] that we cannot
proceed without notifying Scott Cook first.'' eBay does not appear to
have pursued the potential candidate beyond this point as everyone
agreed ``that it's to[o] awkward to call Scott [Cook] when we don't
even know if the candidate has interest,'' demonstrating that the non-
solicitation agreement had a distinct chilling effect on recruitment
and hiring between the two companies.
18. On or about April 2007, eBay's commitment metastasized into a
no-hire agreement. The impetus was a complaint from Mr. Cook to Ms.
Whitman that he was ``quite unhappy'' about a potential offer that eBay
was going to make to an Intuit employee who had approached eBay. Ms.
Axelrod spoke with Ms. Whitman regarding Mr. Cook's concerns, and
instructed David Knight, then eBay's Vice President, Internal
Communications, to hold off on making the offer. Mr. Knight urged Ms.
Axelrod to find a way to make the offer happen, as the decision put the
applicant ``in a tough position and us in a bad place with California
law'' and left eBay ``another 6 months away from getting another
candidate'' for the position. A week later, Mr. Knight wrote to Ms.
Axelrod and Ms. Whitman pleading with them to at least ``negotiate''
any shift from a ``no poaching'' agreement to a ``no hiring'' agreement
after this particular applicant was hired, as eBay ``desperately
need[ed] this position filled.''
19. While Ms. Axelrod ultimately authorized Mr. Knight to extend an
offer to this Intuit employee, eBay did expand the agreement to
prohibit eBay from hiring any employee from Intuit, regardless of how
that employee applied for the job. A few months later, for example, an
eBay human resources manager alerted Ms. Axelrod to a potential
``situation'' and wanted to know if eBay ``continue[d] to be sensitive
to Scott [Cook]'s request'' or if there was ``any flexibility on hiring
from Intuit.'' The Intuit candidate was ``getting a lot of responses
from managers directly'' before the human resource manager's team was
involved as his ``education is fantastic.'' Ms. Axelrod confirmed,
however, that even when an Intuit employee was ``dying'' to work for
eBay and had proactively reached out to eBay, hiring managers had ``no
flexibility'' and must keep their ``hands off'' the potential
applicant.
20. Two eBay staffers sought to clarify the situation with Ms.
Axelrod shortly thereafter. Ms. Axelrod said: ``We have an explicit
hands of[f] that we cannot violate with any Intuit employee. There is
no flexibility on this.'' The staff asked for further amplification:
``This applies even if the Intuit employee has reached out and
specifically asked? If so then I assume that person could NEVER be
hired by ebay unless they quit Intuit first.'' Ms. Axelrod confirmed
this was ``correct.'' Ms. Axelrod similarly explained the impact of the
agreement to Ms. Whitman: ``I keep getting inquiries from our folks to
recruit from Intuit and I am firmly holding the line. No exceptions
even if the candidate proactively contacts us.'' In another email
exchange, Ms. Axelrod explained that she was responding to all
inquiries regarding hiring from Intuit by ``firmly holding the line and
saying absolutely not (including to myself since their comp[ensation]
and ben[efits] person is supposed to be excellent!).''
21. Mr. Cook was a driving force behind eBay's no-hire agreement
with Intuit. In one 2007 email, an eBay recruiter confirmed that the
message to Intuit candidates should be that eBay was ``not allowed to
hire from Intuit per Scott Cook regardless of whether the candidate
applies directly or if we reach out.'' eBay recruiting personnel
understood that ``Meg [Whitman] and Scott Cook entered into the
agreement (handshake style, not written) that eBay would not hire from
Intuit, period.'' Mr. Cook and Intuit, on the other hand, agreed that
Intuit would not recruit from eBay. Mr. Cook explained to one applicant
who had decided to work for eBay but expressed a future interest in
joining Intuit, that ``Intuit is precluded from recruiting you'' unless
eBay has decided it does not need the employee or where the employee
informs his management and then proactively contacts Intuit.
22. eBay insisted that Intuit refrain from recruiting its employees
in exchange for the limitation on eBay's ability to recruit and hire
Intuit employees. On August 27, 2007, Ms. Axelrod wrote Ms. Whitman to
complain that while eBay was sticking to its agreement not to hire
Intuit employees, ``it is hard to do this when Intuit recruits our
folks.'' Ms. Axelrod forwarded Ms. Whitman a recruiting flyer that
Intuit had sent to an eBay employee. Ms. Whitman forwarded Ms.
Axelrod's email to Mr. Cook the same day asking him to ``remind your
folks not to send this stuff to eBay people.'' Mr. Cook responded
quickly: ``@!%$[caret]&!!! Meg my apologies. I'll
find out how this slip up occurred again. . . .''
23. Throughout the course of the agreement, eBay repeatedly
declined opportunities to hire or interview Intuit employees, even when
eBay had open positions for ``quite some time,'' when the potential
employee ``look[ed] great,'' or when ``the only guy who was good was
from [I]ntuit.'' eBay employees were instructed not to pursue potential
hires that came from Intuit and to discard their resumes. When a
candidate applied for a position and told eBay that she had left
Intuit, Ms. Axelrod went so far as to write Mr. Cook to confirm that
the applicant had, in fact, left the company.
24. The companies acknowledged that throughout the agreement, they
``passed'' on ``talented'' applicants, consistent with their
anticompetitive agreement. The repeated requests from lower level
employees at both companies to be allowed to recruit employees from the
other firm demonstrates that the agreement denied employees the
opportunity to compete for better job opportunities.
25. The agreement between eBay and Intuit remained in effect for at
least some period of time after a United States Department of Justice
investigation of agreements between technology companies that
restricted hiring practices became public. One eBay employee asked
another in June 2009 if she had been ``able to connect with Beth
[Axelrod] re our policies around hiring from Intuit with respect to'' a
former employee at eBay's PayPal division who ``wishes to return'' and
noted press reports of the Department of Justice investigation. The
employee responded: ``It's a no go . . . too
[[Page 27642]]
complicated. We should move to plan b.'' (Ellipses in original.)
Violation Alleged (Violation of Section 1 of the Sherman Act)
26. The United States hereby incorporates paragraphs 1 through 25.
27. eBay and Intuit are direct competitors for employees, including
specialized computer engineers and scientists, covered by the agreement
at issue here. eBay and Intuit entered into a naked no-solicitation and
no-hire agreement, thereby reducing their ability and incentive to
compete for employees. This agreement suppressed competition between
eBay and Intuit, thereby limiting affected employees' ability to secure
better compensation, benefits, and working conditions.
28. eBay's agreement with Intuit is per se unlawful under Section 1
of the Sherman Act, 15 U.S.C. 1. No elaborate industry analysis is
required to demonstrate the anticompetitive character of this
agreement.
29. The no-solicitation and no-hire agreement between eBay and
Intuit is also an unreasonable restraint of trade that is unlawful
under Section 1 of the Sherman Act, 15 U.S.C. 1, under an abbreviated
or ``quick look'' rule of reason analysis. The principal tendency of
the agreement between eBay and Intuit is to restrain competition, as
the nature of the restraint is obvious and the agreement has no
legitimate pro-competitive justification. Even an observer with a
rudimentary understanding of economics could therefore conclude the
agreement would have an anticompetitive effect on employees and harm
the competitive process.
Requested Relief
The United States requests that:
(A) The Court adjudge and decree that the Defendant's agreement
with Intuit not to compete constitutes an illegal restraint of
interstate trade and commerce in violation of Section 1 of the Sherman
Act;
(B) the Defendant be enjoined and restrained from enforcing or
adhering to any existing agreement that unreasonably restricts
competition for employees between it and anyone else;
(C) the Defendant be permanently enjoined and restrained from
establishing any similar agreement unreasonably restricting competition
for employees except as prescribed by the Court;
(D) the United States be awarded such other relief as the Court may
deem just and proper to redress and prevent recurrence of the alleged
violation and to dissipate the anticompetitive effects of the illegal
agreement entered into by eBay and Intuit; and
(E) the United States be awarded the costs of this action.
Dated: April 19, 2013.
For Plaintiff United States Of America.
William J. Baer,
Assistant Attorney General for Antitrust.
Terrell Mcsweeny,
Chief Counsel for Competition Policy and Intergovernmental
Relations.
Patricia A. Brink,
Director of Civil Enforcement.
Mark W. Ryan,
Director of Litigation.
James J. Tierney,
Chief, Networks & Technology Enforcement Section.
Brian J. Stretch, (CSBN 163973), Acting United States Attorney.
ALEX G. TSE (CSBN 152348),
Chief, Civil Division,
Office of the United States Attorney,
Northern District of California,
150 Almaden Blvd., Suite 900,
San Jose, CA 95113,
Telephone: 408-535-5061.
Facsimile: 408-535-5066.
[email protected].
--/s/------
N. Scott Sacks
--/s/------
Jessica N. Butler-Arkow
--/s/------
Adam T. Severt
--/s/------
Ryan Struve
--/s/------
Anna T. Pletcher
Attorneys for the United States Networks & Technology Enforcement
Section, 450 Fifth Street NW., Suite 7100, >Washington, DC 20530,
Telephone: (202) 307-6200, Facsimile: (202) 616-8544,
[email protected].
EXHIBIT A
N. Scott Sacks, Attorney (DC Bar No. 913087)
Jessica N. Butler-Arkow, Attorney (DC Bar No. 430022)
Danielle Hauck, Attorney (Member, New York Bar, numbers not assigned)
Anna T. Pletcher, Attorney (California Bar No. 239730)
Adam T. Severt, Attorney (Member, Maryland Bar, numbers not assigned)
Ryan Struve, Attorney (DC Bar No. 495406)
Shane Wagman, Attorney (California Bar No. 283503)
United States Department of Justice, Antitrust Division, 450 Fifth
Street NW., Suite 7100, Washington, DC 20530, Telephone: (202) 307-
6200, Facsimile: (202) 616-8544, Email: [email protected]
Attorneys for Plaintiff United States of America
UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF CALIFORNIA
SAN JOSE DIVISION
UNITED STATES OF AMERICA, Plaintiff, v. EBAY, INC., Defendant.
Case No. 12-CV-05869-EJD-PSG
COMPETITIVE IMPACT STATEMENT
Competitive Impact Statement
Plaintiff United States of America (``United States''), pursuant to
Section 2(b) of the Antitrust Procedures and Penalties Act (``APPA'' or
``Tunney Act''), 15 U.S.C. 16(b)-(h), files this Competitive Impact
Statement relating to the proposed Final Judgment submitted for entry
in this civil antitrust proceeding.
I. Nature and Purpose of the Proceeding
The United States brought this lawsuit against Defendant eBay Inc.
(``eBay'') on November 16, 2012, to remedy a violation of Section 1 of
the Sherman Act, 15 U.S.C. 1.\1\ Section 1 of the Sherman Act outlaws
``[e]very contract, combination in the form of trust or otherwise, or
conspiracy, in restraint of trade or commerce among the several
States.'' 15 U.S.C. 1. The Sherman Act is designed to ensure ``free and
unfettered competition as the rule of trade. It rests on the premise
that the unrestrained interaction of competitive forces will yield the
best allocation of our economic resources, the lowest prices, the
highest quality and the greatest material progress. . . .'' National
Collegiate Athletic Assn v. Board of Regents of Univ. of Okla., 468
U.S. 85, 104 n.27 (1984) (quoting Northern Pac. Ry. v. United States,
356 U.S. 1, 4-5 (1958)).
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\1\ The United States filed an Amended Complaint on June 4,
2013. Am. Compl., United States v. eBay Inc., No.12-cv-05869-EJD
(N.D. Cal. filed June 4, 2013), ECF No. 36. All references to the
Complaint refer to the Amended Complaint.
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The Complaint alleges that eBay entered an agreement with Intuit,
Inc. (``Intuit''), pursuant to which each firm agreed to restrict
certain employee recruiting and hiring practices. The two firms agreed
not to recruit each other's employees, and eBay agreed not to hire
Intuit employees. The effect of this agreement was to reduce
competition for highly-skilled technical and other employees, diminish
potential employment opportunities for those same employees, and
interfere with the competitive and efficient functioning of the price-
setting mechanism in the labor market that would otherwise have
prevailed. The Complaint alleged the agreement is a naked restraint of
trade and violates Section 1 of the Sherman Act, 15 U.S.C. 1.
[[Page 27643]]
eBay filed a Motion to Dismiss (``Motion'') pursuant to Federal
Rule of Civil Procedure 12(b)(6) (failure to state a claim upon which
relief can be granted), arguing that the Complaint failed to allege (1)
an actionable agreement between two separate and independent firms
because the agreement was essentially the product of the relationship
between eBay and one of its outside directors, Scott Cook, in his
capacity as an eBay director and (2) harm to competition under a ``rule
of reason'' analysis. Def.'s Mot. to Dismiss the Compl. Pursuant to
FRCP 12(b)(6), & Mem. Of P. & A. In Support Thereof, United States v.
eBay Inc., ---- F. Supp. 2d ----, 2013 WL 5423734 (N.D. Cal. Sept. 27,
2013) (No.12-cv-05869-EJD), ECF No. 15.
In Opposition to the Motion, the United States maintained that the
Complaint alleged facts to demonstrate that the agreement was between
eBay and Intuit as two separate and independent firms (i.e, that Cook
was acting in his capacity as Chairman of the Executive Committee of
Intuit, Inc.), and that the alleged ``naked'' horizontal market
allocation agreement was ``per se'' unlawful or, alternatively,
unlawful under a ``quick-look'' rule of reason analysis, and thus a
full rule of reason analysis was unnecessary. Opp'n of the United
States to Def.'s Mot. to Dismiss Pursuant to FRCP Rule 12(b)(6), United
States v. eBay Inc., ---- F. Supp. 2d ----, 2013 WL 5423734 (N.D. Cal.
Sept. 27, 2013) (No.12-cv-05869-EJD), ECF No. 24. After eBay's Reply
brief and a hearing, the Court denied the motion to dismiss on
September 27, 2013. United States v. eBay Inc., ---- F. Supp. 2d ----,
2013 WL 5423734 (N.D. Cal. Sept. 27, 2013).
The Court found that the United States had alleged an actionable
agreement between two separate firms, eBay and Intuit. Id. at *4. The
Court, after noting that horizontal market allocation agreements
typically constitute per se violations of Section 1, also found that
the United States had adequately alleged a per se horizontal market
allocation agreement. In doing so, the Court rejected eBay's contention
that the fact that the alleged agreement involved a labor market should
prevent the court from finding a ``classic'' horizontal market
agreement that would warrant per se treatment. Id. at *5-6. The Court
noted that eBay's argument that the alleged restraint was not naked as
alleged by the United States but was ancillary to a legitimate business
purpose could only be resolved after discovery. Id. at *6.
The United States today filed a Stipulation and proposed Final
Judgment which would remedy the violation by enjoining eBay from
enforcing any such agreements currently in effect, and prohibit eBay
from entering similar agreements in the future. The United States and
eBay have stipulated that the proposed Final Judgment may be entered
after compliance with the APPA, unless the United States withdraws its
consent. Entry of the proposed Final Judgment would terminate this
action, except that this Court would retain jurisdiction to construe,
modify, and enforce the proposed Final Judgment and to punish
violations thereof.
II. Description of the Events Giving Rise to the Alleged Violation of
the Antitrust Laws
eBay and Intuit compete to hire specialized computer engineers,
scientists, and other categories of employees. According to eBay's
Senior Vice President for Human Resources, and co-author of The War for
Talent, soliciting the employees of other firms in similar industries
is an important arena of competition. (Compl. ]] 5, 10, 11.)
Beginning no later than 2006, and lasting at least until 2009,
Intuit and eBay maintained an illegal agreement that restricted their
ability to actively recruit employees from each other, and for some
part of that time, further restricted eBay from hiring any employees
from Intuit. The agreement covered all employees of both firms and was
not limited by geography, job function, product group, or time period.
As the Complaint alleges, senior executives and directors at eBay
and Intuit reached this express agreement through direct and explicit
communications. The executives actively managed and enforced the
agreement through direct communications. For example, in November 2005,
eBay Chief Operating Officer Maynard Webb asked Cook, Intuit's Founder
and Chairman of its Board Executive Committee and an outside director
of eBay, to enter into a no-solicitation agreement under which eBay
would not actively recruit from Intuit; eBay would notify Intuit in
advance before offering a position at the Senior Director level or
above to an Intuit employee; and eBay would notify Intuit after making
an offer below that level. Intuit rejected the proposal because it
allowed eBay to hire Intuit employees without prior notice to Intuit.
Cook wrote that Intuit did not recruit from board companies (i.e., the
companies from which its outside directors came), ``period'' and
``[w]e're passionate on this.'' (Compl. ] 15.) Cook committed that
Intuit would not make an offer to anyone from eBay without first
notifying eBay. (Compl. ] 15.)
In December 2005, eBay Chief Executive Officer Meg Whitman and Cook
again discussed their firms' competition for employees with an eye
toward ending that competition entirely. (Compl. ] 16.) Ultimately, an
agreement not to solicit each other's employees was put into effect.
When eBay considered hiring an Intuit employee for an opening at
Paypal, executives internally expected that Whitman ``will say hands
off because Scott [Cook] insists on a no poach policy with Intuit.''
Whitman confirmed that eBay could not proceed without notifying Intuit.
(Compl. ] 17.)
In April 2007, eBay and Intuit expanded their agreement to bar eBay
from hiring any Intuit employees. Cook had complained to eBay about a
potential offer to an Intuit employee who had approached eBay. Even
when Intuit employees were well-suited for its positions, eBay
refrained from hiring them due to its agreement with Intuit. (Compl. ]]
19-20.) As eBay's Senior Vice President for Human Resources Beth
Axelrod explained to recruiting staff, ``We have an explicit hands
of[f] that we cannot violate with any Intuit employee. There is no
flexibility on this.'' (Compl. ] 20.) When asked if the agreement meant
that a ``person could NEVER be hired by eBay unless they quit Intuit
first,'' Axelrod confirmed that this was the case. (Compl. ] 20.) In
another email exchange, Axelrod explained that she was responding to
all inquiries regarding hiring from Intuit by ``firmly holding the line
and saying absolutely not (including to myself since their
comp[ensation] and ben[efits] person is supposed to be excellent!).''
(Compl. ] 20.) eBay recruiting personnel understood that ``Meg
[Whitman] and Scott Cook entered into the agreement (handshake style,
not written) that eBay would not hire from Intuit, period.'' (Compl. ]
21.)
eBay insisted that Intuit refrain from recruiting its employees in
exchange for a limitation on eBay's ability to recruit and hire Intuit
employees. Both eBay and Intuit personnel policed adherence to the
agreement. In 2007, Whitman complained to Cook that Intuit had
solicited eBay's employees even though eBay was sticking to its
agreement not to hire Intuit employees. Cook apologized,
``@!%$[caret]&!!! Meg my apologies. I'll find out how
this slip up occurred again . . . .'' (Compl. ] 22.)
Throughout the course of the agreement, eBay repeatedly declined
opportunities to hire or interview Intuit employees, even when eBay had
open
[[Page 27644]]
positions for ``quite some time,'' when the potential employee
``look[ed] great,'' or when ``the only guy who was good was from
[I]ntuit.'' (Compl. ] 23.) Both Intuit and eBay acknowledged that
throughout the agreement, they ``passed'' on ``talented'' applicants,
consistent with their anticompetitive agreement. The repeated requests
from lower level employees at both companies to be allowed to recruit
employees from the other firm demonstrates that there were
opportunities for employees to move between the two firms and that
employees were denied those opportunities. (Compl. ] 24.)
The agreement harmed employees by depriving them of opportunities
for better jobs with higher salaries and greater benefits at the other
firm. (Compl. ]] 1, 3, 11.) The agreement also distorted the
competitive process in the labor markets in which eBay and Intuit
compete. (Compl. ] 11.)
III. The Agreement Was a Naked Restraint and Not Ancillary To Achieving
Legitimate Business Purposes
A. The Agreement Was a Naked Restraint of Trade That Is Per Se Unlawful
Under Section 1 of the Sherman Act, 15 U.S.C. 1
The law has long recognized that ``certain agreements or practices
which because of their pernicious effect on competition and lack of any
redeeming virtue are conclusively presumed to be unreasonable and
therefore illegal without elaborate inquiry as to the precise harm they
have caused or the business excuse for their use.'' Northern Pac. Ry.,
356 U.S. at 545; accord, Catalano, Inc. v. Target Sales, Inc., 446 U.S.
643, 646 n.9 (1980). Such naked restraints of competition among
horizontal competitors (i.e., agreements that have a pernicious effect
on competition with no redeeming virtue), such as price-fixing or
market allocation agreements, are deemed per se unlawful.
eBay's agreement with Intuit is a per se unlawful horizontal market
allocation agreement under Section 1 of the Sherman Act. See eBay,
Inc., 2013 WL 5423734 at *5-*7 (in denying Defendant's Motion to
Dismiss, the Court recognized that a horizontal market allocation
typically constitutes a per se violation of Section 1 and that the
facts alleged in the United States' Complaint taken as true ``suffice
to state a horizontal market allocation agreement''). The two firms'
concerted behavior both reduced their ability to compete for employees
and disrupted the normal competitive mechanisms that allocate employees
in labor markets. The market allocation agreement is facially
anticompetitive because it clearly eliminated significant competition
between the firms to attract technical and other employees. Overall,
the agreement diminished competition to the detriment of the affected
employees who likely were deprived of competitively important
information and access to better job opportunities, as well as
distorting competition in the labor market.
In analogous circumstances, the Sixth Circuit has held that an
agreement among competitors not to solicit one another's customers was
a per se violation of the antitrust laws. U.S. v. Cooperative Theaters
of Ohio, Inc., 845 F.2d 1367 (6th Cir. 1988). In that case, two movie
theater booking agents agreed to refrain from actively soliciting each
other's customers. Despite the defendants' arguments that they
``remained free to accept unsolicited business from their competitors'
customers,'' id. (emphasis in original), the Sixth Circuit found their
no-solicitation agreement'' was ``undeniably a type of customer
allocation scheme which courts have often condemned in the past as a
per se violation of the Sherman Act.'' Id. at 1373.
B. The Per Se Rule Against Naked Restraints of Trade Applies With Equal
Force in Labor Markets
Market allocation agreements cannot be distinguished from one
another based solely on whether they involve input or output markets,
as anticompetitive agreements in both input and output markets create
allocative inefficiencies.\2\ Nor are labor markets treated differently
than other input markets under the antitrust laws.
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\2\ In 1991, the Antitrust Division brought an action against
conspirators who competed to procure billboard leases and who had
agreed to refrain from bidding on each other's former leases for a
year after the space was lost or abandoned by the other conspirator.
United States v. Brown, 936 F.2d 1042 (9th Cir. 1991) (affirming
jury verdict convicting defendants of conspiring to restrain trade
in violation of 15 U.S.C. 1). The agreement was limited to an input
market (the procurement of billboard leases) and did not extend to
downstream sales (in which the parties also competed). In affirming
defendants' convictions, the appellate court held that the agreement
was per se unlawful, finding that the agreement restricted each
company's ability to compete for the other's billboard sites and
clearly allocated markets between the two billboard companies. A
market allocation agreement between two companies at the same market
level is a classic per se antitrust violation. Id. at 1045.
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Accordingly, in denying eBay's Motion to Dismiss, the Court held in
this case that the fact that the alleged market allocation occurs in an
input market, i.e., the employment market, did not, as a matter of law,
prevent the Court from finding that the agreement as alleged amounts to
a ``classic'' horizontal market division, and that antitrust law does
not treat employment markets differently from other markets in this
respect. See eBay, Inc., 2013 WL 5423734 at *5.
The United States has previously challenged restraints on
employment as per se illegal.\3\ In fact, the restraint challenged here
is broader than the no cold call restraints challenged in United States
v. Adobe Systems, Inc. and the prohibition on counteroffers challenged
in United States v. Lucasfilm Ltd., because the conduct challenged here
also prohibited eBay from hiring Intuit employees. The prohibition of
hiring in its entirety renders the eBay-Intuit agreement, taken as a
whole, more pernicious than previously-challenged agreements to refrain
from cold-calling or counter-offering, and is also per se unlawful. See
National Soc'y of Prof. Engineers v. United States, 435 U.S. 679, 695
(1978); Harkins Amusement Enter., Inc. v. Gen. Cinema Corp., 850 F.2d
477, 487 (9th Cir. 1988).
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\3\ In September 2010, the United States filed suit charging six
high technology companies with a per se violation of Section 1 for
entering bilateral agreements to prohibit each company from cold
calling the other company's employees. United States v. Adobe Sys.,
Inc., et al.; Proposed Final Judgment and Competitive Impact
Statement, 75 FR 60820, 60820-01 (Oct. 1, 2010); Final Judgment,
United States v. Adobe Sys., Inc., et al., 10-cv-1629 (D.D.C. Mar.
17, 2011), ECF No. 17. In December 2010, the United States filed
suit charging Lucasfilm Ltd. with a per se violation of Section 1
for entering an agreement with Pixar to prohibit cold calling of
each other's employees and setting forth anti-counteroffer rules
that restrained bidding for employees. United States v. Lucasfilm
Ltd.; Proposed Final Judgment and Competitive Impact Statement, 75
FR 81651-01 (Dec. 28, 2010); Order, United States v. Lucasfilm Ltd.,
10-cv-2220 (D.D.C. June 3, 2011), ECF No. 7.
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C. The Unlawful Agreements Were Not Ancillary to a Legitimate
Procompetitive Venture
An agreement that would normally be condemned as a per se unlawful
restraint on competition may nonetheless be lawful if it is ancillary
to a legitimate procompetitive venture and reasonably necessary to
achieve the procompetitive benefits of the collaboration. Ancillary
restraints therefore are not per se unlawful, but rather are evaluated
under the rule of reason, which balances a restraint's procompetitive
benefits against its anticompetitive effects.\4\ To be
[[Page 27645]]
considered ``ancillary'' under established antitrust law, however, the
restraint must be a necessary or intrinsic part of the procompetitive
collaboration.\5\ Restraints that are broader than reasonably necessary
to achieve the efficiencies from a business collaboration are not
ancillary and are properly treated as per se unlawful.
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\4\ See generally Department of Justice, Antitrust Division, and
Federal Trade Commission, Antitrust Guidelines for Collaborations
Among Competitors Sec. 1.2 (2000) (``Collaboration Guidelines'').
See also Major League Baseball v. Salvino, 542 F.3d 290, 339 (2d
Cir. 2008) (Sotomayor, J., concurring) (``a per se or quick look
approach may apply . . . where a particular restraint is not
reasonably necessary to achieve any of the efficiency-enhancing
benefits of a joint venture and serves only as a naked restraint
against competition.''); Dagher v. Saudi Refining, Inc., 369 F.3d
1108, 1121 (9th Cir. 2004) (describing ancillary restraints as
``reasonably necessary to further the legitimate aims of the joint
venture''); rev'd on other grounds sub nom. Texaco v. Dagher, 547
U.S. 1, 8 (2006); Rothery Storage & Van Co. v. Atlas Van Lines,
Inc., 792 F.2d 210, 227 (D.C. Cir. 1986) (``[T]he restraints it
imposes are reasonably necessary to the business it is authorized to
conduct''); In re Polygram Holdings., Inc., 2003 WL 21770765 (F.T.C.
2003) (stating that parties must prove that the restraint was
``reasonably necessary'' to permit them to achieve particular
alleged efficiency), aff'd, Polygram Holdings, Inc. v. F.T.C., 416
F.3d 29 (D.C. Cir. 2005).
\5\ See Rothery Storage & Van Co., 792 F.2d at 227 (national
moving network in which the participants shared physical resources,
scheduling, training, and advertising resources, could forbid
contractors from free riding by using its equipment, uniforms, and
trucks for business they were conducting on their own); Salvino, 542
F.3d at 337 (Sotomayor, J., concurring) (Major League Baseball
teams' formal joint venture to exclusively license, and share
profits for, team trademarks, resulted in ``decreased transaction
costs, lower enforcement and monitoring costs, and the ability to
one-stop shop. . . .'' and such benefits ``could not exist without
the . . . agreements.''); Addamax v. Open Software Found., 152 F.3d
48 (1st Cir. 1998) (computer manufacturers' nonprofit joint research
and development venture agreement on price to be paid for security
software that was used by the joint venture was ancillary to effort
to develop a new operating system). See also Collaboration
Guidelines at Sec. 3.2 (``[I]f the participants could achieve an
equivalent or comparable efficiency-enhancing integration through
practical, significantly less restrictive means, then . . . the
agreement is not reasonably necessary.'').
---------------------------------------------------------------------------
The Division saw no evidence of a relevant legitimate collaborative
project involving eBay and Intuit, nor was the recruiting agreement
into which they entered, under established antitrust law, properly
ancillary to any such collaboration if it existed. The agreement
extended to all employees at the firms, regardless of any employee's
relationship to any collaboration. The agreement was not limited by
geography, job function, product group, or time period. Accordingly,
the agreement was not reasonably necessary for any collaboration
between the two firms and hence, not a legitimate ancillary restraint.
IV. Explanation of the Proposed Final Judgment
The proposed Final Judgment sets forth (1) conduct in which eBay
may not engage; (2) conduct in which eBay may engage without violating
the proposed Final Judgment; (3) certain actions eBay is required to
take to ensure compliance with the terms of the proposed Final
Judgment; and (4) oversight procedures the United States may use to
ensure compliance with the proposed Final Judgment. Section VI of the
proposed Final Judgment provides that these provisions will expire five
years after entry of the proposed Final Judgment.
A. Prohibited Conduct
The proposed Final Judgment is essentially the same as that entered
in United States v. Adobe Sys., Inc., et al.; Proposed Final Judgment
and Competitive Impact Statement, 75 FR 60820, 60820-01 (Oct. 1, 2010).
Section IV of the proposed Final Judgment preserves competition for
employees by prohibiting eBay, and all other persons in active concert
or participation with eBay with notice of the Final Judgment, from
agreeing, or attempting to agree, with another person to refrain from
cold calling, soliciting, recruiting, hiring or otherwise competing for
employees of the other person. It also prohibits eBay from requesting
or pressuring another person to refrain from cold calling, soliciting,
recruiting, hiring or otherwise competing for employees of the other
person. These provisions prohibit agreements not to make counteroffers
and agreements to notify each other when making an offer to each
other's employee.
B. Conduct Not Prohibited
The Final Judgment does not prohibit all agreements related to
employee solicitation and recruitment. Section V makes clear that the
proposed Final Judgment does not prohibit ``no direct solicitation
provisions'' \6\ that are reasonably necessary for, and thus ancillary
to, legitimate procompetitive collaborations.\7\ Such restraints remain
subject to scrutiny under the rule of reason.
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\6\ Section II.C. of the proposed Final Judgment defines ``no
direct solicitation provision'' as ``any agreement, or part of an
agreement, among two or more persons that restrains any person from
hiring, cold calling, soliciting, recruiting, or otherwise competing
for employees of another person.''
\7\ The Complaint alleges a violation of the Sherman Antitrust
Act, 15 U.S.C. 1. The scope of the Final Judgment is limited to
violations of the federal antitrust laws. It prohibits certain
conduct and specifies other conduct that the Judgment would not
prohibit. The Judgment does not address whether any conduct it does
not prohibit would be prohibited by other federal or state laws,
including California Business & Professions Code Sec. 16600
(prohibiting firms from restraining employee movement).
---------------------------------------------------------------------------
Section V.A.1 does not prohibit no direct solicitation provisions
contained in existing and future employment or severance agreements
with eBay's employees. Narrowly tailored no direct solicitation
provisions are often included in severance agreements and rarely
present competition concerns. Sections V.A.2-5 also make clear that the
proposed Final Judgment does not prohibit no direct solicitation
provisions reasonably necessary for:
1. Mergers or acquisitions (consummated or unconsummated),
investments, or divestitures, including due diligence related
thereto;
2. contracts with consultants or recipients of consulting
services, auditors, outsourcing vendors, recruiting agencies or
providers of temporary employees or contract workers;
3. the settlement or compromise of legal disputes; and
4. contracts with resellers or OEMs; contracts with certain
providers or recipients of services; or the function of a legitimate
collaboration agreement, such as joint development, technology
integration, joint ventures, joint projects (including teaming
agreements), and the shared use of facilities.
Section V of the proposed Final Judgment contains additional
requirements applicable to no direct solicitation provisions contained
in these types of contracts and collaboration agreements. The proposed
Final Judgment recognizes that eBay may sometimes enter written or
unwritten contracts and collaboration agreements and sets forth
requirements that recognize the different nature of written and
unwritten contracts.
Thus, for written contracts, Section V.B of the proposed Final
Judgment requires eBay to: (1) Identify, with specificity, the
agreement to which the no direct solicitation provision is ancillary;
(2) narrowly tailor the no direct solicitation provision to affect only
employees who are anticipated to be directly involved in the
arrangement; (3) identify with reasonable specificity the employees who
are subject to the no direct solicitation provision; (4) include a
specific termination date or event; and (5) sign the agreement,
including any modifications to the agreement.
If the no direct solicitation provision relates to an oral
agreement, Section V.C of the proposed Final Judgment requires eBay to
maintain documents sufficient to show the terms of the no direct
solicitation provision, including: (1) The specific agreement to which
the no direct solicitation provision is ancillary; (2) an
identification, with reasonable specificity, of the employees who are
subject to the no direct solicitation provision; and (3) the no direct
[[Page 27646]]
solicitation provision's specific termination date or event.\8\
---------------------------------------------------------------------------
\8\ For example, eBay might document these requirements through
electronic mail or in memoranda that it will retain.
---------------------------------------------------------------------------
The purpose of Sections V.B. and V.C. is to ensure that no direct
solicitation provisions related to eBay's contracts with resellers,
OEMs, and providers of services, and collaborations with other
companies, are reasonably necessary to the contract or collaboration.
In addition, the requirements set forth in Sections V.B and V.C of the
proposed Final Judgment provide the United States with the ability to
monitor eBay's compliance with the proposed Final Judgment.
eBay has a number of routine consulting and services agreements
that contain no direct solicitation provisions that may not comply with
the terms of the proposed Final Judgment. To avoid the unnecessary
burden of identifying these existing contracts and re-negotiating any
no direct solicitation provisions, Section V.D of the proposed Final
Judgment provides that eBay shall not be required to modify or conform
existing no direct solicitation provisions included in consulting or
services agreements to the extent such provisions violate this Final
Judgment. The Final Judgment further prohibits eBay from enforcing any
such existing no direct solicitation provision that would violate the
proposed Final Judgment.
Finally, Section V.E of the proposed Final Judgment provides that
eBay is not prohibited from unilaterally adopting or maintaining a
policy not to consider applications from employees of another person,
or not to solicit, cold call, recruit or hire employees of another
person, provided that eBay does not request or pressure another person
to adopt, enforce, or maintain such a policy.
C. Required Conduct
Section VI of the proposed Final Judgment sets forth various
mandatory procedures to ensure eBay's compliance with the proposed
Final Judgment, including providing officers, directors, human resource
managers, and senior managers who supervise employee recruiting with
copies of the proposed Final Judgment and annual briefings about its
terms. Section VI.A.5 requires eBay to provide its employees with
reasonably accessible notice of the existence of all agreements covered
by Section V.A.5 and entered into by the company.
Under Section VI, eBay must file annually with the United States a
statement identifying any agreement covered by Section V.A.5., and
describing any violation or potential violation of the Final Judgment
known to any officer, director, human resources manager, or senior
manager who supervises employee recruiting, solicitation, or hiring
efforts. If one of these persons learns of a violation or potential
violation of the Judgment, eBay must take steps to terminate or modify
the activity to comply with the Judgment and maintain all documents
related to the activity.
D. Compliance
To facilitate monitoring of eBay's compliance with the proposed
Final Judgment, Section VII grants the United States access, upon
reasonable notice, to eBay's records and documents relating to matters
contained in the proposed Final Judgment. eBay must also make its
employees available for interviews or depositions about such matters.
Moreover, upon request, eBay must answer interrogatories and prepare
written reports relating to matters contained in the proposed Final
Judgment.
V. Remedies Available to Potential Private Litigants
Section 4 of the Clayton Act, 15 U.S.C. 15, provides that any
person who has been injured as a result of conduct prohibited by the
antitrust laws may bring suit in federal court to recover three times
the damages the person has suffered, as well as costs and reasonable
attorneys' fees. Entry of the proposed Final Judgment will neither
impair nor assist the bringing of any private antitrust damage action.
Under the provisions of Section 5(a) of the Clayton Act, 15 U.S.C.
16(a), the proposed Final Judgment has no prima facie effect in any
subsequent private lawsuit that may be brought against eBay.
On the same date and in the same court this case was filed by the
United States, the State of California filed a related case based on
the same factual allegations, The People of the State of California v.
eBay, Inc., No. 12-cv-5874-EJD (N.D. Cal. filed November 16, 2012). On
the same date that the United States filed its proposed final judgment
in this case, the State of California filed a proposed parens patriae
settlement which would provide up to $2.675 million in restitution
directly to individuals and to compensate for harm to the state's
economy.
VI. Procedures Applicable for Approval or Modification of the Proposed
Final Judgment
The United States and eBay have stipulated that the proposed Final
Judgment may be entered by the Court after compliance with the
provisions of the APPA, provided that the United States has not
withdrawn its consent. The APPA conditions entry upon the Court's
determination that the proposed Final Judgment is in the public
interest.
The APPA provides a period of at least sixty (60) days preceding
the effective date of the proposed Final Judgment within which any
person may submit to the United States written comments regarding the
proposed Final Judgment. Any person who wishes to comment should do so
within sixty (60) days of the date of publication of this Competitive
Impact Statement in the Federal Register, or the last date of
publication in a newspaper of the summary of this Competitive Impact
Statement, whichever is later. All comments received during this period
will be considered by the United States, which remains free to withdraw
its consent to the proposed Final Judgment at any time prior to the
Court's entry of judgment. The comments and the response of the United
States will be filed with the Court and published in the Federal
Register.
Written comments should be submitted to: James J. Tierney, Chief,
Networks & Technology Enforcement Section, Antitrust Division, United
States Department of Justice, 450 Fifth Street NW., Suite 7100,
Washington, DC 20530.
The proposed Final Judgment provides that the Court retains
jurisdiction over this action, and the parties may apply to the Court
for any order necessary or appropriate for the modification,
interpretation, or enforcement of the Final Judgment.
VII. Alternatives to the Proposed Final Judgment
The United States considered, as an alternative to the proposed
Final Judgment, a full trial on the merits against eBay. The United
States is satisfied, however, that the relief contained in the proposed
Final Judgment will quickly establish, preserve, and ensure that
employees can benefit from competition between eBay and others. Thus,
the proposed Final Judgment would achieve all or substantially all of
the relief the United States would have obtained through litigation,
but avoids the time, expense, and uncertainty of a full trial on the
merits of the Complaint.
[[Page 27647]]
VIII. Standard of Review Under the APPA for the Proposed Final Judgment
The Clayton Act, as amended by the APPA, requires that proposed
consent judgments in antitrust cases brought by the United States be
subject to a sixty-day comment period, after which the Court shall
determine whether entry of the proposed Final Judgment ``is in the
public interest.'' 15 U.S.C. 16(e)(1). In making that determination,
the Court, in accordance with the statute as amended in 2004, is
required to consider:
(A) The competitive impact of such judgment, including
termination of alleged violations, provisions for enforcement and
modification, duration of relief sought, anticipated effects of
alternative remedies actually considered, whether its terms are
ambiguous, and any other competitive considerations bearing upon the
adequacy of such judgment that the court deems necessary to a
determination of whether the consent judgment is in the public
interest; and
(B) the impact of entry of such judgment upon competition in the
relevant market or markets, upon the public generally and
individuals alleging specific injury from the violations set forth
in the complaint including consideration of the public benefit, if
any, to be derived from a determination of the issues at trial.
15 U.S.C. 16(e)(1)(A) & (B). In considering these statutory factors,
the Court's inquiry is necessarily a limited one as the United States
is entitled to ``broad discretion to settle with the Defendant within
the reaches of the public interest.'' United States v. Microsoft Corp.,
56 F.3d 1448, 1461 (D.C. Cir. 1995); see generally United States v. SBC
Commc'ns, Inc., 489 F. Supp. 2d 1 (D.D.C. 2007) (assessing public
interest standard under the Tunney Act); United States v. InBev N.V./
S.A., 2009-2 Trade Cas. (CCH) ] 76,736, 2009 U.S. Dist. LEXIS 84787,
No. 08-1965 (JR), at *3 (D.D.C. Aug. 11, 2009) (noting that the court's
review of a consent judgment is limited and only inquires ``into
whether the government's determination that the proposed remedies will
cure the antitrust violations alleged in the complaint was reasonable,
and whether the mechanism to enforce the final judgment are clear and
manageable'').\9\
\9\ The 2004 amendments substituted ``shall'' for ``may'' in
directing relevant factors for a court to consider and amended the
list of factors to focus on competitive considerations and to
address potentially ambiguous judgment terms. Compare 15 U.S.C.
16(e) (2004), with 15 U.S.C. 16(e)(1) (2006); see also SBC Commc'ns,
489 F. Supp. 2d at 11 (concluding that the 2004 amendments
``effected minimal changes'' to Tunney Act review).
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Under the APPA a court considers, among other things, the
relationship between the remedy secured and the specific allegations
set forth in the United States' complaint, whether the decree is
sufficiently clear, whether enforcement mechanisms are sufficient, and
whether the decree may positively harm third parties. See Microsoft, 56
F.3d at 1458-62. With respect to the adequacy of the relief secured by
the decree, a court may not ``engage in an unrestricted evaluation of
what relief would best serve the public.'' United States v. BNS, Inc.,
858 F.2d 456, 462 (9th Cir. 1988) (citing United States v. Bechtel
Corp., 648 F.2d 660, 666 (9th Cir. 1981)); see also Microsoft, 56 F.3d
at 1460-62; United States v. Alcoa, Inc., 152 F. Supp. 2d 37, 40
(D.D.C. 2001); InBev, 2009 U.S. Dist. LEXIS 84787, at *3. Courts have
held that:
[t]he balancing of competing social and political interests
affected by a proposed antitrust consent decree must be left, in the
first instance, to the discretion of the Attorney General. The
court's role in protecting the public interest is one of insuring
that the government has not breached its duty to the public in
consenting to the decree. The court is required to determine not
whether a particular decree is the one that will best serve society,
but whether the settlement is `within the reaches of the public
interest.' More elaborate requirements might undermine the
effectiveness of antitrust enforcement by consent decree.
Bechtel, 648 F.2d at 666 (emphasis added) (citations omitted).\10\ In
determining whether a proposed settlement is in the public interest, a
district court ``must accord deference to the government's predictions
about the efficacy of its remedies, and may not require that the
remedies perfectly match the alleged violations.'' SBC Commc'ns, 489 F.
Supp. 2d at 17; see also Microsoft, 56 F.3d at 1461 (noting the need
for courts to be ``deferential to the government's predictions as to
the effect of the proposed remedies''); United States v. Archer-
Daniels-Midland Co., 272 F. Supp. 2d 1, 6 (D.D.C. 2003) (noting that
the court should grant due respect to the United States' prediction as
to the effect of proposed remedies, its perception of the market
structure, and its views of the nature of the case).
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\10\ Cf. BNS, 858 F.2d at 464 (holding that the court's
``ultimate authority under the [APPA] is limited to approving or
disapproving the consent decree''); United States v. Gillette Co.,
406 F. Supp. 713, 716 (D. Mass. 1975) (noting that, in this way, the
court is constrained to ``look at the overall picture not
hypercritically, nor with a microscope, but with an artist's
reducing glass''). See generally Microsoft, 56 F.3d at 1461
(discussing whether ``the remedies [obtained in the decree are] so
inconsonant with the allegations charged as to fall outside of the
`reaches of the public interest.' '').
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In addition, ``a proposed decree must be approved even if it falls
short of the remedy the court would impose on its own, as long as it
falls within the range of acceptability or is `within the reaches of
public interest.' '' United States v. American Tel. & Tel. Co., 552 F.
Supp. 131, 151 (D.D.C. 1982) (citations omitted) (quoting United States
v. Gillette Co., 406 F. Supp. 713, 716 (D. Mass. 1975)), aff'd sub nom.
Maryland v. United States, 460 U.S. 1001 (1983); see also United States
v. Alcan Aluminum Ltd., 605 F. Supp. 619, 622 (W.D. Ky. 1985)
(approving the consent decree even though the court would have imposed
a greater remedy). To meet this standard, the United States ``need only
provide a factual basis for concluding that the settlements are
reasonably adequate remedies for the alleged harms.'' SBC Commc'ns, 489
F. Supp. 2d at 17.
Moreover, the Court's role under the APPA is limited to reviewing
the remedy in relationship to the violations that the United States has
alleged in its Complaint, and does not authorize the court to
``construct [its] own hypothetical case and then evaluate the decree
against that case.'' Microsoft, 56 F.3d at 1459; see also InBev, 2009
U.S. Dist. LEXIS 84787, at *20 (``[T]he `public interest' is not to be
measured by comparing the violations alleged in the complaint against
those the court believes could have, or even should have, been
alleged.''). Because the ``court's authority to review the decree
depends entirely on the government's exercising its prosecutorial
discretion by bringing a case in the first place,'' it follows that
``the court is only authorized to review the decree itself,'' and not
to ``effectively redraft the complaint'' to inquire into other matters
that the United States did not pursue. Microsoft, 56 F.3d. at 1459-60.
Courts ``cannot look beyond the complaint in making the public interest
determination unless the complaint is drafted so narrowly as to make a
mockery of judicial power.'' SBC Commc'ns, 489 F. Supp. 2d at 15.
In its 2004 amendments, Congress made clear its intent to preserve
the practical benefits of utilizing consent decrees in antitrust
enforcement, adding the unambiguous instruction that ``[n]othing in
this section shall be construed to require the court to conduct an
evidentiary hearing or to require the court to permit anyone to
intervene.'' 15 U.S.C. 16(e)(2). This language effectuates what
Congress intended when it enacted the Tunney Act in 1974, as Senator
Tunney explained: ``[t]he court is nowhere compelled to go to trial or
to engage in extended proceedings which might have the effect of
vitiating the benefits of
[[Page 27648]]
prompt and less costly settlement through the consent decree process.''
119 Cong. Rec. 24,598 (1973) (statement of Senator Tunney). Rather, the
procedure for the public interest determination is left to the
discretion of the Court, with the recognition that the court's ``scope
of review remains sharply proscribed by precedent and the nature of
Tunney Act proceedings.'' SBC Commc'ns, 489 F. Supp. 2d at 11.\11\
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\11\ See United States v. Enova Corp., 107 F. Supp. 2d 10, 17
(D.D.C. 2000) (noting that the ``Tunney Act expressly allows the
court to make its public interest determination on the basis of the
competitive impact statement and response to comments alone'');
United States v. Mid-Am. Dairymen, Inc., 1977-1 Trade Cas. (CCH) ]
61,508, at 71,980 (W.D. Mo. 1977) (``Absent a showing of corrupt
failure of the government to discharge its duty, the Court, in
making its public interest finding, should . . . carefully consider
the explanations of the government in the competitive impact
statement and its responses to comments in order to determine
whether those explanations are reasonable under the
circumstances.''); S. Rep. No. 93-298, 93d Cong., 1st Sess., at 6
(1973) (``Where the public interest can be meaningfully evaluated
simply on the basis of briefs and oral arguments, that is the
approach that should be utilized.'').
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IX. Determinative Documents
There are no determinative materials or documents within the
meaning of the APPA that the United States considered in formulating
the proposed Final Judgment.
Dated: May 1, 2014.
For Plaintiff United States of America.
N. Scott Sacks,
Jessica N. Butler-Arkow,
Danielle Hauck,
Anna T. Pletcher,
Adam T. Severt,
Ryan Struve,
Shane Wagman,
Attorneys.
United States Department of Justice, Antitrust Division, 450 5th
Street NW., Suite 7100, Washington, DC 20530, Telephone: (202) 307-
6200, Facsimile: (202) 616-8544, Email: [email protected].
EXHIBIT A
UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF CALIFORNIA
SAN JOSE DIVISION
UNITED STATES OF AMERICA, Plaintiff,
v.
EBAY INC., Defendant.
Case No. 12-CV-05869-EJD-PSG
[PROPOSED] FINAL JUDGMENT
[Proposed] Final Judgment
WHEREAS, the United States of America filed its Complaint on
November 16, 2012, alleging that the Defendant participated in an
agreement in violation of Section One of the Sherman Act, and the
United States and the Defendant, by their attorneys, have consented to
the entry of this Final Judgment without trial or further adjudication
of any issue of fact or law;
AND WHEREAS, this Final Judgment does not constitute any admission
by the Defendant that the law has been violated or of any issue of fact
or law;
AND WHEREAS, the Defendant agrees to be bound by the provisions of
this Final Judgment pending its approval by this Court;
NOW THEREFORE, before any testimony is taken, without trial or
further adjudication of any issue of fact or law, and upon consent of
the Defendant, it is ORDERED, ADJUDGED, AND DECREED:
I. Jurisdiction
This Court has jurisdiction over the subject matter and the parties
to this action. The Complaint states a claim upon which relief may be
granted against the Defendant under Section One of the Sherman Act, as
amended, 15 U.S.C. 1.
II. Definitions
As used in this Final Judgment:
A. ``eBay'' means eBay Inc., its (i) successors and assigns, (ii)
controlled subsidiaries, divisions, groups, affiliates, partnerships,
and joint ventures, and (iii) directors, officers, managers, agents
acting within the scope of their agency, and employees.
B. ``Agreement'' means any contract, arrangement, or understanding,
formal or informal, oral or written, between two or more persons.
C. ``No direct solicitation provision'' means any agreement, or
part of an agreement, among two or more persons that restrains any
person from cold calling, soliciting, recruiting, hiring, or otherwise
competing for employees of another person.
D. ``Person'' means any natural person, corporation, company,
partnership, joint venture, firm, association, proprietorship, agency,
board, authority, commission, office, or other business or legal
entity, whether private or governmental.
E. ``Senior manager'' means any company officer or employee above
the level of vice president.
III. Applicability
This Final Judgment applies to eBay, as defined in Section II, and
to all other persons in active concert or participation with eBay who
receive actual notice of this Final Judgment by personal service or
otherwise.
IV. Prohibited Conduct
The Defendant is enjoined from attempting to enter into, entering
into, maintaining or enforcing any agreement with any other person to
in any way refrain from, requesting that any person in any way refrain
from, or pressuring any person in any way to refrain from hiring,
soliciting, cold calling, recruiting, or otherwise competing for
employees of the other person.
V. Conduct Not Prohibited
A. Nothing in Section IV shall prohibit the Defendant and any other
person from attempting to enter into, entering into, maintaining or
enforcing a no direct solicitation provision, provided the no direct
solicitation provision is:
1. Contained within existing and future employment or severance
agreements with the Defendant's employees;
2. reasonably necessary for mergers or acquisitions, consummated or
unconsummated, investments, or divestitures, including due diligence
related thereto;
3. reasonably necessary for contracts with consultants or
recipients of consulting services, auditors, outsourcing vendors,
recruiting agencies or providers of temporary employees or contract
workers;
4. reasonably necessary for the settlement or compromise of legal
disputes; or
5. reasonably necessary for (i) contracts with resellers or OEMs;
(ii) contracts with providers or recipients of services other than
those enumerated in paragraphs V.A.1-4 above; or (iii) the function of
a legitimate collaboration agreement, such as joint development,
technology integration, joint ventures, joint projects (including
teaming agreements), and the shared use of facilities.
B. All no direct solicitation provisions that relate to written
agreements described in Section V.A.5.i, ii, or iii that the Defendant
enters into, renews, or affirmatively extends after the date of entry
of this Final Judgment shall:
1. Identify, with specificity, the agreement to which it is
ancillary;
2. be narrowly tailored to affect only employees who are
anticipated to be directly involved in the agreement;
3. identify with reasonable specificity the employees who are
subject to the agreement;
4. contain a specific termination date or event; and
5. be signed by all parties to the agreement, including any
modifications to the agreement.
C. For all no direct solicitation provisions that relate to
unwritten agreements described in Section V.A.5.i, ii, or iii, that the
Defendant enters into,
[[Page 27649]]
renews, or affirmatively extends after the date of entry of this Final
Judgment, the Defendant shall maintain documents sufficient to show:
1. The specific agreement to which the no direct solicitation
provision is ancillary;
2. the employees, identified with reasonable specificity, who are
subject to the no direct solicitation provision; and
3. the provision's specific termination date or event.
D. The Defendant shall not be required to modify or conform, but
shall not enforce, any no direct solicitation provision to the extent
it violates this Final Judgment if the no direct solicitation provision
appears in the Defendant's consulting or services agreements in effect
as of the date of this Final Judgment (or in effect as of the time the
Defendant acquires a company that is a party to such an agreement).
E. Nothing in Section IV shall prohibit the Defendant from
unilaterally deciding to adopt a policy not to consider applications
from employees of another person, or to solicit, cold call, recruit or
hire employees of another person, provided that the Defendant is
prohibited from requesting that any other person adopt, enforce, or
maintain such a policy, and is prohibited from pressuring any other
person to adopt, enforce, or maintain such a policy.
VI. Required Conduct
A. The Defendant shall:
1. Furnish a copy of this Final Judgment and related Competitive
Impact Statement within sixty (60) days of entry of the Final Judgment
to its officers, directors, human resources managers, and senior
managers who supervise employee recruiting, solicitation, or hiring
efforts;
2. furnish a copy of this Final Judgment and related Competitive
Impact Statement to any person who succeeds to a position described in
Section VI.A.1 within thirty (30) days of that succession;
3. annually brief each person designated in Sections VI.A.1 and
VI.A.2 on the meaning and requirements of this Final Judgment and the
antitrust laws;
4. obtain from each person designated in Sections VI.A.1 and
VI.A.2, within sixty (60) days of that person's receipt of the Final
Judgment, a certification that he or she (i) has read and, to the best
of his or her ability, understands and agrees to abide by the terms of
this Final Judgment; (ii) is not aware of any violation of the Final
Judgment that has not been reported to the Defendant; and (iii)
understands that any person's failure to comply with this Final
Judgment may result in an enforcement action for civil or criminal
contempt of court against the Defendant and/or any person who violates
this Final Judgment;
5. provide employees reasonably accessible notice of the existence
of all agreements covered by Section V.A.5 and entered into by the
company; and
6. maintain (i) a copy of all agreements covered by Section V.A.5;
and (ii) a record of certifications received pursuant to this Section.
B. For five (5) years after the entry of this Final Judgment, on or
before its anniversary date, the Defendant shall file with the United
States an annual statement identifying and providing copies of any
agreement and any modifications thereto described in Section V.A.5, as
well as describing any violation or potential violation of this Final
Judgment known to any officer, director, human resources manager, or
senior manager who supervises employee recruiting, solicitation, or
hiring efforts. Descriptions of violations or potential violations of
this Final Judgment shall include, to the extent practicable, a
description of any communications constituting the violation or
potential violation, including the date and place of the communication,
the persons involved, and the subject matter of the communication.
C. If any officer, director, human resources manager, or senior
manager who supervises employee recruiting, solicitation, or hiring
efforts of the Defendant learns of any violation or potential violation
of any of the terms and conditions contained in this Final Judgment,
the Defendant shall promptly take appropriate action to terminate or
modify the activity so as to comply with this Final Judgment and
maintain all documents related to any violation or potential violation
of this Final Judgment.
VII. Compliance Inspection
A. For the purposes of determining or securing compliance with this
Final Judgment, or of determining whether the Final Judgment should be
modified or vacated, from time to time authorized representatives of
the United States Department of Justice, including consultants and
other persons retained by the United States, shall, upon the written
request of an authorized representative of the Assistant Attorney
General in charge of the Antitrust Division, and on reasonable notice
to the Defendant, subject to any legally recognized privilege, be
permitted:
1. Access during the Defendant's regular office hours to inspect
and copy, or at the option of the United States, to require the
Defendant to provide electronic or hard copies of, all books, ledgers,
accounts, records, data, and documents in the possession, custody, or
control of the Defendant, relating to any matters contained in this
Final Judgment; and
2. to interview, either informally or on the record, the
Defendant's officers, employees, or agents, who may have their counsel,
including any individual counsel, present, regarding such matters. The
interviews shall be subject to the reasonable convenience of the
interviewee and without restraint or interference by the Defendant.
B. Upon the written request of an authorized representative of the
Assistant Attorney General in charge of the Antitrust Division, the
Defendant shall submit written reports or responses to written
interrogatories, under oath if requested, relating to any of the
matters contained in this Final Judgment as may be requested.
C. No information or documents obtained by the means provided in
this section shall be divulged by the United States to any person other
than an authorized representative of the executive branch of the United
States, except in the course of legal proceedings to which the United
States is a party (including grand jury proceedings), or for the
purpose of securing compliance with this Final Judgment, or as
otherwise required by law.
D. If at the time information or documents are furnished by the
Defendant to the United States, the Defendant represents and identifies
in writing the material in any such information or documents to which a
claim of protection may be asserted under Rule 26(c)(1)(G) of the
Federal Rules of Civil Procedure, and the Defendant marks each
pertinent page of such material, ``Subject to claim of protection under
Rule 26(c)(1)(G) of the Federal Rules of Civil Procedure,'' then the
United States shall give the Defendant ten (10) calendar days notice
prior to divulging such material in any legal proceeding (other than a
grand jury proceeding).
VIII. Retention of Jurisdiction
This Court retains jurisdiction to enable any party to this Final
Judgment to apply to this Court at any time for further orders and
directions as may be necessary or appropriate to carry out or construe
this Final Judgment, to modify any of its provisions, to enforce
compliance, and to punish violations of its provisions.
[[Page 27650]]
IX. Expiration of Final Judgment
Unless this court grants an extension, this Final Judgment shall
expire five (5) years from the date of its approval by the Court.
X. Notice
For purposes of this Final Judgment, any notice or other
communication shall be given to the persons at the addresses set forth
below (or such other addresses as they may specify in writing to EBay):
Chief, Networks & Technology Enforcement Section, U.S. Department of
Justice, Antitrust Division, 450 Fifth Street NW., Suite 7100,
Washington, DC 20530.
XI. Public Interest Determination
Entry of this Final Judgment is in the public interest. The parties
have complied with the Procedures of the Antitrust Procedures and
Penalties Act, 15 U.S.C. 16, including making copies available to the
public of this Final Judgment, the Competitive Impact Statement, and
any comments thereon and the United States' responses to comments.
Based upon the record before the Court, which includes the Competitive
Impact Statement and any comments and response to comments filed with
the Court, entry of this final judgment is in the public interest.
Court approval subject to procedures of Antitrust Procedures and
Penalties Act, 15 U.S.C. 16
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United States District Judge
[FR Doc. 2014-11056 Filed 5-13-14; 8:45 am]
BILLING CODE P