Tech companies under antitrust investigation

Some high-profile companies are being investigated for what appears to be a “gentlemen’s agreement”:

The Justice Department has launched an investigation into whether some of the nation’s largest technology companies violated antitrust laws by negotiating the recruiting and hiring of one another’s employees, according to two sources with knowledge of the review.

The review, which is said to be in its preliminary stages, is focused on the search engine giant Google; its competitor Yahoo; Apple, maker of the popular iPhone; and the biotech firm Genentech, among others, according to the sources, who spoke on condition of anonymity because the investigation is ongoing.

It’s not terribly surprising that such a thing exists.  Top talent pop around these firms (as well as starting their own), and in knowledge businesses, talent is pretty much the only source of strategic advantage.  At the very least, talent is the antecedent of almost all other sources of strategic advantage, such as processes, patents, and technologies.

The effect of the alleged agreement is an interesting one to think through.  One would expect some homogenization of top talent, but might that not happen anyway?  These are the top companies in their lines of business, and top talent should tend to either gravitate to top companies or be groomed by them.  One might also expect some stabilizing or downward pressure on compensation, but that doesn’t seem to be the case either; these guys are loaded.  Would we expect them to be more loaded without such an agreement?

The odious effect seems to be higher barriers to a career move.  Let’s say I am the guy who invented Google Yogurt, a fictitious service that searches for the nearest place to buy yogurt and gives coordinates, maps, opening and closing times, price lists, etc.  Let’s say I hear about an opening for lead engineer at Apple for a new app called iYogurt; the app will enable iPhone users to link into Google Yogurt and get the information delivered directly to their iPhones.  I am probably the most qualified candidate in the world for that position, but unbeknownst to me (probably), Google and Apple have had conversations in which Apple promised not to poach me and Google promised not to poach the gal who came up with Apple’s iCake (can you tell I’m hungry this morning?).

Does this improve the lot of Apple and Google?  Not really.  It probably only serves to stem losses, not to improve value.  Does it stifle creativity?  Probably.  A change of scene and culture usually helps to cross-pollinate ideas.  Does it hurt me as an employee?  Hell yeah.  It limits my career mobility, probably limits my earning potential, and might deprive me of the opportunity to contribute on some really cool projects (that’s a matter of degree, I imagine).

It’s not entirely clear what the nature of the agreements among these companies were, but I can’t see any immediate upside for anyone involved, just defensive postures.  That seems very unlike Google, Apple, and Genentech.

3 responses to “Tech companies under antitrust investigation

  1. This is another example of prosecutorial assault.
    “The Justice Department has launched an investigation … according to two sources with knowledge of the review. ”

    Anonymous sources. From where?

    Justice Department officials declined to comment …”

    Nonsense. The Justice Department already commented by purposeful “leaking” of the story.

    Have charges been filed?
    No, this is just an “investigation.”

    Anti-trust is well-known to be one of the worst examples of law, being completely non-objective. A shred of credence might exist if these companies were in the same line, but Genentech and Apple? (Maybe the Justice Department thinks that Apple “clones” — like PC “clones” of the 1980s — are on the horizon via genetic engineering. Do we call them Pears?)

    How is this essentially different from people coming together at a conference because their respective employers have allocated funds for travel and lodging? In other words, by what right does the government decide who can and cannot exchange which catalogues of information via what mechanisms?

    • It was pretty unclear to me how Genentech got into that mix too. I’m no antitrust expert, but deals about employees seems to be stretching the definition. Not sure about your conference example–this seems more like back-door dealing by the employers to control the terms of employment among a group of companies–perhaps a kind of “anti-union”.

  2. Pingback: Week in Public Organizations, 7Jun2009 « PublicOrgTheory

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