Some of Silicon Valley’s most high profile companies settled an antitrust lawsuit last week, a settlement that will help the tech titans save billions.
Involved in the deal were Google (NASDAQ: GOOG), Apple (NASDAQ: AAPL), Intel (NASDAQ: INTC) and Adobe (NASDAQ: ADBE).
The lawsuit was over secret “anti-poaching” agreements between the four companies. As the plaintiffs claimed, the four tech titans colluded to establish secret agreements to not recruit each other’s employees.
As alleged in the lawsuit, by eliminating competition for talent between the companies they were able to avoid the wage increases required to retain their employees.
The lawsuit sought as much as $3 billion in damages. And in a federal antitrust lawsuit, damages won in a trial can be tripled. The potential damage for these companies was as high as $9 billion dollars. The settlement is around 10% of the original damages sought and around 3% of the total penalties the companies could’ve faced.
With a settlement of $324 million, the 64,000 employees affected have technically won. But really, it’s Google, Apple, Intel and Adobe that won.
And that doesn’t even count the legal costs that could’ve resulted from a lengthy trial in federal court.
Frankly, this is a huge win for the tech companies involved. The evidence was, shall we say, incriminating.
In an e-mail exchange between former Google CEO Eric Schmidt and one of his human resources directors about an anti-poaching agreement, the then-CEO is quoted as saying the agreement should be discussed “verbally, since I don’t want to create a paper trail over which we can be sued later.”
If that’s not the proverbial ‘smoking gun’ then I don’t know what is.
Executives and HR staffers from all four companies were caught in the electronic “paper trail” of e-mail conversations about the no-poaching agreements. The lawsuit seemed certain to head to trial and even more certain to result in a win for the tech workers involved.
Though the result of the lawsuit is a win for the employees, it won’t result in a big payday for any of them. The $324 million settlement divided by 64,000 employees is only $5,062.50 per employee. And that doesn’t count the percentage that will go straight to the lawyers. Compare that to the $46,875 per employee that a $3 billion settlement would’ve brought.
Will this bring any meaningful change to the way that tech firms recruit from each other? Probably not. This is barely even a slap on the wrist. Plus, such secret agreements can just as easily be formed in person where there is no paper trail.
At issue here is illegal collusion between companies to prevent competition over employees. And there is no question that illegal collusion took place. In pre-trial legal briefs the companies did not even dispute this, they only took issue with whether or not the agreements were part of a conspiracy to keep wages down.
As for the settlement, the four tech firms involved paid pennies on the dollar for what would’ve almost certainly have been a verdict against them. This is a clear case of a seemingly large settlement helping tech titans save billions.
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