EBay Sued by U.S. Over Recruiting Accords With Intuit

EBay Inc. (EBAY), the world’s largest online marketplace, was accused by the U.S. and California of violating antitrust laws by agreeing not to hire people working for Intuit Inc. (INTU)

Senior executives at EBay and Intuit struck “evolving handshake” accords from 2006 to 2009 to restrict recruiting and hiring each others’ workers, according to a complaint by the U.S. Justice Department filed yesterday in federal court in San Jose, California. The practice allegedly distorted competition for specialized computer engineers and scientists and made it harder for workers to get better, higher paying jobs.

“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,” according to the complaint.

California also sued EBay yesterday in the same court. Intuit, which settled a Justice Department case over hiring practices in 2010, isn’t named as a defendant in either case.

Intuit, the Mountain View, California-based financial software company that makes TurboTax and QuickBooks, Google Inc. (GOOG), Apple Inc. (AAPL) and three other technology companies agreed in 2010 to halt agreements under which companies refrained from placing “cold calls” to lure workers from competitors. The agreements resolved an antitrust lawsuit filed against the companies in Washington. No companies were fined.

2010 Investigation

The Justice Department’s 2010 antitrust investigation focused on recruiting and hiring practices at some of the biggest U.S. technology companies. The agency said at the time that it would continue to investigate other “no solicitation” agreements.

EBay said it will vigorously defend itself against the lawsuits, which the company described as overly aggressive.

“EBay Inc. strongly believes that the Department of Justice and California Attorney General are wrong and are using the wrong standard in these matters,” Lara Wyss, a company spokesman, said in an e-mailed statement. “We compete openly for talent in a broad, diverse global market across a range of industries and professional disciplines, and EBay’s hiring practices conform to the standards that the Department of Justice has approved in resolving cases against other companies.”

Meg Whitman, then chief executive officer at EBay, and Scott Cook, founder and chairman at Intuit, were “intimately involved” in forming and enforcing the agreements between the companies, Justice Department lawyers said in yesterday’s complaint.

‘War for Talent’

EBay and Intuit called a truce in the “war for talent” among technology companies, according to the complaint. EBay initially sought a limited no-solicitation agreement aimed at high-level employees, and expanded it to “placate” Cook, who was on EBay’s board and had complained about EBay’s hiring practices, according to the lawsuit.

An initial agreement between EBay and Intuit took effect in August 2006, and EBay backed away from hiring an Intuit employee for an opening at its PayPal unit, according to the complaint. By April 2007, the accord became a no-hire agreement after Cook complained to Whitman about a job offer made to an Intuit worker.

Whitman forwarded to Cook a recruiting flier Intuit had sent to an EBay employee. “#@!%$#^&!!! Meg my apologies. I’ll find out how this slip up occurred again...” Cook responded in an e-mail, according to the complaint.

The lawsuit seeks a judgment that the agreements constitute an illegal restraint of trade and a court order blocking any similar agreement, as well as damages “to dissipate the anticompetitive effects” of the agreements.

State Laws

California Attorney General Kamala Harris said in her complaint that the agreements violate state laws in addition to federal laws. She identified Intuit as a “co-conspirator.”

“This is an EBay matter,” Diane Carlini, an Intuit spokeswoman, said in a phone interview. “The DOJ lawsuit clearly mentions Intuit but we have already resolved any concerns the DOJ had with our recruiting practices. We believe the matter is resolved and we are in compliance.”

Intuit is cooperating with the California Attorney General’s investigation, Carlini said in an e-mail.

Michael Thacker, a spokesman for Hewlett-Packard Co. (HPQ), where Whitman is now CEO, declined to comment in an e-mail. Whitman retired from EBay in 2008 and joined HP in 2011.

The Justice Department case is U.S. v. EBay, 12-5859, U.S. District Court, Northern District of California (San Jose). The state case is California v. EBay, 12-5874, U.S. District Court, Northern District of California (San Jose).

To contact the reporter on this story: Karen Gullo in San Francisco at kgullo@bloomberg.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net

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