Revealed: Apple and Google's wage-fixing cartel involved dozens more companies, over one million employees
“British medieval ordinances of Bristol cobblers in 1364 state, ‘Masters are forbidden to poach workers from other members of the craft.’”
— Orly Lobel, Talent Wants To Be Free Back in January, I wrote about "The Techtopus" — an illegal agreement between seven tech giants, including Apple, Google, and Intel, to suppress wages for tens of thousands of tech employees. The agreement prompted a Department of Justice investigation, resulting in a settlement in which the companies agreed to curb their restricting hiring deals. The same companies were then hit with a civil suit by employees affected by the agreements.
This week, as the final summary judgement for the resulting class action suit looms, and several of the companies mentioned (Intuit, Pixar and Lucasfilm) scramble to settle out of court, Pando has obtained court documents (embedded below) which show shocking evidence of a much larger conspiracy, reaching far beyond Silicon Valley.
Confidential internal Google and Apple memos, buried within piles of court dockets and reviewed by PandoDaily, clearly show that what began as a secret cartel agreement between Apple’s Steve Jobs and Google’s Eric Schmidt to illegally fix the labor market for hi-tech workers, expanded within a few years to include companies ranging from Dell, IBM, eBay and Microsoft, to Comcast, Clear Channel, Dreamworks, and London-based public relations behemoth WPP. All told, the combined workforces of the companies involved totals well over a million employees.
According to multiple sources familiar with the case, several of these newly named companies were also subpoenaed by the DOJ for their investigation. A spokesperson for Ask.com confirmed that in 2009-10 the company was investigated by the DOJ, and agreed to cooperate fully with that investigation. Other companies confirmed off the record that they too had been subpoenaed around the same time.
Although the Department ultimately decided to focus its attention on just Adobe, Apple, Google, Intel, Intuit, Lucasfilm and Pixar, the emails and memos clearly name dozens more companies which, at least as far as Google and Apple executives were concerned, formed part of their wage-fixing cartel.
A confidential Google memo (above, left) titled “Special Agreement Hiring Policy,” dating from November 2006, divides the company's wage-fixing agreements into two categories: “Do Not Cold Call” and “Sensitive Companies.” Below that, the Google memo offers a brief chronology and list of companies:
The following companies have special agreements with Google and are part of the “Do Not Cold Call” list.The first entry marks the beginning of Google’s participation in the wage-suppression scheme:
Effective March 6, 2005:
- Genentech, Inc. • Intel Corporation • Apple Computer • Paypal, Inc. • Comcast Corporation Until now, neither Paypal (owned by eBay), Comcast nor Genentech have been publicly mentioned as part of the wage-suppression cartel. Nor have they been publicly named in criminal or civil actions relating to this particular case, although both the DOJ and the state of California are currently pursuing a separate but related antitrust suits against eBay.
The "effective date" of Google's first wage-fixing agreements, early March 2005, follows a few weeks after Steve Jobs threatened Google’s Sergey Brin to stop all recruiting at Apple: “if you hire a single one of these people,” Jobs emailed Brin, “that means war.”
Jobs threatened Brin and Google on February 17, 2005; nine days later, Apple's VP for Human Resources sent out an internal email to Apple recruiting,
Please add Google to your "hands-off" list. We recently agreed not to recruit from one another so if you hear of any recruiting they are doing against us, please be sure to let me know.
Please also be sure to honor our side of the deal. That was February 26; on March 6, Google's identical non-solicitation agreement with Apple became "effective."
This timeline is important to establish because it demonstrates precisely what makes this scheme illegal: secret cross-agreements between two or more parties to fix wages in the labor market, at a time when tech engineer wages were soaring, threatening profits.
This is just a tiny sample of the "overwhelming" evidence used by both the Justice Department's antitrust division, and the District Court judge in San Jose, to debunk the company executives' claims that each had coincidentally implemented identical non-solicitation policies at the same time, with the same companies, without knowing what the other side was doing.
From that point on, the secret cartel expanded. Later that year, in September 2005, eBay CEO Meg Whitman called Schmidt complaining that Google’s recruiters were hurting profits and business at eBay. Schmidt emailed Google’s “Executive Management Committee”—the company’s top executives— summarizing Whitman’s, and “the valley”’s view that competing for workers by offering higher pay packages was “unfair”:
From: Eric Schmidt Sent: Wednesday, September 7, 2005 10:52 PM Subject: Phone call from Meg Whitman
DO NOT FORWARD
Meg called to talk about our hiring practices. Here is what she said:
1. Google is the talk of the valley because we are driving up salaries across the board. People are just waiting for us to fall and get back at us for our “unfair” practices now.
2. Our recruiting practices are “zero sum” and it appears that somewhere in Google we are targeting EBay to “hurt them” and its the reputation that we are doing this against Yahoo, EBay and MSFT (I denied this.) Schmidt’s email clearly prioritizes Whitman's and other CEOs' concerns over the rights of employees or the concept of fair competition, even ordering a Google executive to "fire the recruiter [who offended Whitman] immediately." Schmidt's email ends:
This was a rough call from a good friend. We need to get this fixed.Within weeks of Whitman’s call to Schmidt, eBay was placed on a Google list of “Sensitive” companies, for whom Google placed fewer restrictions on its recruiters except at the executive recruitment level. It was at this time that Google began to internally formalize its illegal wage-suppression pacts—and Schmidt was clearly worried about getting caught.
In early October, 2005, Google’s Senior VP for Human Resources, Shona Brown, emailed Schmidt a draft list of companies on their “Do Not Call” and “Sensitive” lists, and the policy protocols. Schmidt responded:
“This looks very good Eric”Schmidt was then asked if Google sales executive Omid Kordestani could share “with Ebay/PP the rules as they pertain to them?”
“I would prefer that Omid do it verbally since I don’t want to create a paper trail over which we can be sued later? Not sure about this.. thanks Eric”Google's HR head at the time, Shona Brown, agreed with her boss, in lower-case ee cummings syntax:
“makes sense to do orally. i agree.”A year later, by the end of 2006, Google upgraded eBay to its “Do Not Cold Call” list, joining OpenTV, Nvidia Technologies, and Intuit along with the original five companies.
Google’s “Sensitive” companies list (right) had meanwhile grown to include AOL, AskJeeves, Clear Channel, Earthlink, IBM, Lycos, and NTL, a major British cable company known today as Virgin Media.
Some of the companies Pando contacted for this article insisted, off the record, that they had not agreed to appear on Google or Apple's lists, and that there were no reciprocal non-solicitation agreements. Indeed, that same line of defense was used by many of the defendants in the current case.
Of course, it's possible that Google, Apple or others simply added companies to their don't recruit lists without coordinating with them first. That said, as we see from the Whitman and Jobs emails above, addition to the list was frequently prompted by an angry phone call or heated discussion.
One example of this is Dell who, despite not being listed in the civil suit or DOJ investigation, was included on Google's "don't call" list after an angry email from Michael Dell himself.
On April 19, 2007, Dell wrote to Schmidt [typos Dell's—M.A.]:
I learned recently that Google extend an offer to one of our sales guys, [REDACTED].
Not real happy about this and not the kind of think we would expect given our partnership.
We should discuss next time we are together but I think we should have a general understanding that we are not actively recruiting from each other.
Michael Two days later, Schmidt forwarded Dell's email to two top Google HR executives, and added his own comment up top:
Lets put them on the "don't call into Dell" list for a while. Thanks ericWe'll continue to press companies to comment on the record regarding any discussions which may have caused them to be added to Google or Apple's lists.
* * * *Incredible as it may seem, the Techtopus was just getting started. Between the end of 2006 and early 2008, its tentacles multiplied, reaching into the lives of workers across the globe and across more industries.
A confidential Google document titled “Special Agreement Hiring Policy,” dated January 7, 2008, expanded the categories and definitions of the company’s secret deals. What started as a two-page memo in late 2006, had now grown to a list nine pages long.
Under a new category, “Restricted Hiring,” the Google memo lists four firms and their subsidiares:
• Sun Microsystems
These companies alone had a combined workforce of well over 200,000 employees. However, the protocols under “Restricted Hiring” limited the wage-theft pact to manager-level and above:
“For each of these ‘Restricted Hiring’ companies, Google has agreed to the following protocol.
1. Not to pursue manager level and above candidates for Product, Sales, or G&A roles — even if they have applied to Google;
2. However, there are no restrictions to our recruiting from these companies at individual contributor levels for PSG&A;
3. Additionally, there are no restrictions at any level for engineering candidates. Under Google’s “Do Not Cold Call” list, the number of companies doubled from five to 11, but the number of employees potentially affected grew several times more than that:
The following companies (and by association their subsidiaries listed in Appendix A) have special agreements with Google and are part of the ‘Do Not Cold Call’ list.
- Apple, Inc • Comcast Corporation • DoubleClick • Genentech • IBM Corporation (Junior hires okay—also applies to subsidiaries) • Illumita • Intel Corporation • Intuit • Microsoft • Oglivy • WPP These combined workforce of just these eleven companies totaled over 775,000 in 2008. The antitrust lawsuit going to trial in May affects only 100,000 employees of seven tech firms (although three have since settled out of court), leaving most of the firms listed on Google’s confidential documents out.
But we’re not done yet.
Google’s list of “Sensitive Companies,” requiring recruiters to check with Google’s executives first (which could and did mean Google informing on the prospect to his or her employer), is as follows:
- AOL, Inc.
• Clear Channel Communications, Inc.
• Dell, Inc.
• Earthlink, Inc
• Virgin Media, Inc. (Formerly NTL, Inc.)
Beneath that list, a rather cryptic warning suggesting that all across industries, illegal non-solicitation agreements were common everywhere:
“Please be cautious when recruiting teams from any company to keep our candidates and potential employees safe from legal action. Most companies have non-solicit agreements which would limit or prohibit a candidate from asking a coworker to interview with us as well.”That passage alone is a stunning example of not just flagrantly illegal practices—it also shows how few rights companies assume their employees are entitled to, rights that Americans take for granted—such as the right to free speech, the right to assembly, the right to ask one's own co-worker if he or she would be interested in taking a better job somewhere else...
But back to the Techtopus: Finally, Google’s 2008 memo lists 18 staffing agencies which Google has agreed not to recruit from:
“As a general rule, we should not be recruiting staffing talent from any of our approved staffing partners. The lists on the following page outline these partners for both the U.S. and International staffing.”Among the staffing agencies listed: Kelly Services (US and worldwide), Kforce, CDI Business Solutions, Adecco, and others.
And Google isn’t the only company that kept a list. Buried in the court dockets is an email from Apple recruiting manager David Alvarez to fellow Apple recruiting manager Jonathan Geyer, dated July 9, 2009, containing a document titled “Hands Off (Do Not Call List).”
That list includes the other six firms charged by the DOJ and originally named in the wage-suppression class action: Adobe, Google, Intel, Intuit, Pixar and Lucas. But the Apple “Do Not Call” list also includes an additional 21 companies not mentioned in the DOJ investigation or the class action suit. Among the companies that appear to have conspired with Apple to suppress their employees’ wages:
Microsoft, AMD, Best Buy, Cingular, Foxconn, Nvidia, and a handful of distributors like Mac Zone, PC Connection and PC Mall. Some of the companies are on Apple’s “Do Not Call List” because, according to the memo, they share “common board members”: Intuit, JCrew, Nike, and Genentech, whose CEO at the time, Arthur Levinson, sat on Apple’s board of directors.
All of the above is just what's in the mountain of pre-trial court documents. It's highly likely that more names will spill out during testimony. Pando will continue to report any new developments and also will be covering the summary judgment hearing next week.
For now, it’s enough to try to absorb what all of these cross-company, cross-industry secret labor-fixing agreements mean. Most labor stories about wage theft and corporate abuse tend to focus on low-wage earners and the most disadvantaged. Certainly it strains one’s sensibilities to compare an exploited low-wage worker in the fast food or retail industry to tech engineers and programmers, who are far better compensated, live more comfortably, and rarely worry about putting food in their children’s mouths.
In terms of pathos, there is no comparison; minimum wage earners are struggling to survive, and nearly all of the well-educated, privileged-born people in the media world agree that tech industry workers are all a bunch of overpaid misogynist libertarian bros, a caricature that makes it perfectly fine to hate the entire class, and impossible to consider them as political comrades stuck in the same predicament as the rest of the non-multimillionaires in this country.
What’s more important is the political predicament that low-paid fast food workers share with well-paid hi-tech workers: the loss of power over their lives and their futures to the growing mass of concentrated power in Silicon Valley, whose tentacles are so strong now and so great, that hundreds of thousands of workers around the globe—public relations and cable company employees in the British Isles, programmers and tech engineers in Russia and China (according to other documents which I'll write about soon)—have their lives controlled and their wages and opportunities stolen from them without ever knowing about it, all the while being bombarded with cultural cant about the wisdom of the free market, about the efficiency of free knowledge, about the need to take personal responsibility and to blame no one but yourself for everything that happens in your life and your career.
* * * *Editor's note: Comment from companies mentioned in this report
Pando attempted to contact the companies mentioned by name in this report, requesting comment on the civil lawsuit (and in some cases, separate DOJ investigations). All of these requests were made at least two business hours before publication, in line with Pando's standard comment request policy.
For ease of reading, due to the sheer volume of companies involved, except where specific facts are being disputed, we have grouped all of the comments below, rather than including them inline. We will continue to update the list below as we receive additional comment.
An Intuit spokesperson responded with this statement:
"[T]he current lawsuit against eBay mentions Intuit, but we are not named as defendants in the suit.
Regarding the civil case:
Intuit entered into a settlement in the High Tech Employee Antitrust Litigation. We have agreed to resolve this matter without acknowledging any wrongdoing. We continue to believe our actions were fully compliant with the law. This was an expensive and burdensome case and we wanted to put it behind us. Intuit represents approximately 5 percent of the proposed class.
Regarding Bill Campbell’s role:
Bill Campbell, chairman of Intuit’s board, is a board member at Apple and had served as an advisor to Google. He is recognized across companies for being uniquely collaborative and procompetitive. Throughout Silicon Valley, he has played an important and productive role in building relationships that foster innovation.
Regarding the current allegations from the High Tech Employee Antitrust Litigation: Then and today, Bill takes his fiduciary and advisory responsibilities at Intuit seriously, and we believe all of Bill’s actions have fully complied with the law."
An eBay/PayPal spokesperson did not comment on the civil class action suit, but gave Pando the following statement regarding their separate DOJ investigation:
"eBay continues to believe that the Department of Justice and California Attorney General have taken an unprecedented and aggressive approach to their enforcement of antitrust laws in this instance. Nevertheless, eBay is engaging in discussions with the Department of Justice and California Attorney General regarding the possible resolution of this action and believes that a stay of the action will avoid unnecessary use resources while those discussions are pending."
An Intel spokesperson told Pando: "We don't think we violated any laws, and we are going to continue to defend ourselves."
A Virgin Media spokesperson told Pando: "Virgin Media operates solely in the UK. I appreciate Google also recruits here but I don’t believe we’re involved in what sounds like a US lawsuit."
An Adobe spokesperson told Pando: "Adobe does not comment on pending litigation."
A Kelly spokesperson said the company "does not comment on pending litigation against a customer."
A spokesperson for Nike told Pando "Nike is unaware of any such agreement and have no further comment."
A spokesperson for AMD declined to comment for this story.
A spokesperson for AOL declined to comment for this story.
A spokesperson for Cingular/AT&T declined to comment for this story.
A spokesperson for Dell declined to comment for this story.
A spokesperson for Oracle declined to comment for this story.
A spokesperson for Microsoft declined to comment for this story.
Adecco, Apple, Best Buy, CDI Business Solutions, Clear Channel, Comcast, Dreamworks, Foxconn, Genentech, Inc., Google, IBM, Illumita, Jcrew, Kforce, Lucasfilm, Mac Zone, Novell, Nvidia, Oglivy, OpenTV, PC Connection, PC Mall, Pixar, Sun Microsystems and WPP either could not be reached, or had not responded to requests for comment as of publication time.
Follow all of our Techtopus coverage here.
* * * *Documents cited in this report: