California Urges Trial on EBay Recruitment Deal

(CN) - California wants to advance claims that eBay suppressed wages in a "handshake agreement" with TurboTax-maker Intuit over the recruitment of engineers and scientists.

In a 2012 federal complaint, Attorney General Kamal Harris said that the tech companies has since 2006 engaged in a "naked restraint of trade" that reduced salaries, benefits and employment opportunities, and distorted competition between the firms for employees.

"Sometime between November 2005 and the end of 2006, eBay and Intuit entered a 'handshake' agreement limiting the ability of each to recruit and hire employees from the other company," the complaint states. "The agreement, which continued at least until 2009, prohibited each firm from soliciting the other's employees for employment; for over a year, the agreement prevented eBay from hiring any Intuit employees."

EBay Chief Operating Officer Maynard Webb allegedly approached Intuit over the no-solicitation agreement in November 2005.

The popular online auction site offered to notify Intuit, which specializes in financial and tax-prep software, in advance before offering a position at the senior director level or above to an Intuit employee, according to the complaint. Offers below that level would allegedly be conveyed after the fact.

California said Intuit rejected the proposal but agreed to the no-poach policy in December 2005, which was then extended in April 2007.

The firms moved to dismiss the lawsuit in January, claiming that California failed to show that their alleged conduct harmed competition or warranted injunctive relief.

"The complaint admits that eBay stopped engaging in the challenged conduct in 2009," the motion states. "And it does not allege any basis for concluding either that eBay would like to resume the alleged conduct or that Intuit could agree to continue the alleged conduct given the existence of a consent decree with the Antitrust Division that explicitly bars Intuit from engaging in such conduct."

The companies said they ditched the agreement after a federal investigation into similar noncompete practices went public in 2009.

In an opposition filed Tuesday, Deputy Attorney General Nicole Gordon said eBay continued to enforce the agreement even after it knew of the investigation. The agreement "remained in effect for some time after the announcement," in violation of the Sherman and Cartwright Acts, and state unfair competition law.

"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,'" Gordon wrote. "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 the agreement denied employees the opportunity to compete for better job opportunities."

The alleged conduct warrants application of a "quick look" rule of reason analysis, Gordon said, noting that "an observer with even a rudimentary understanding of economics could conclude that the arrangements in question would have an anticompetitive effect on customers and markets.'"

"The agreement harmed employees by depriving them of opportunities for better jobs with higher salaries and greater benefits at the other company," the brief states. "The agreement also distorted the competitive process in the labor markets in which eBay and Intuit hired employees."

U.S. District Judge Edward Davila is scheduled to hear the case on April 26.

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