Apple, Google, Intel And Adobe Settle The Employee Rip Off Suit

Apple , Google , Intel and Adobe have agreed to settle the civil suit alleging that they ripped off their employees by having non-compete agreements between the various potential employers. This was always a likely outcome for the companies had already agreed, with the Feds a couple of years back, that they had indeed been engaging in the behaviour being complained about. So really the only question still at issue was going to be how much would they have to pay to settle rather than anything else. Sure, they might have been able to prevail at trial and that's what led to the plaintiffs settling, that risk, but everyone has assumed for a long time that it's all just been haggling over the actual number:

Apple Inc., Google Inc., Intel Corp. and Adobe Systems Inc. agreed to pay $324.5 million to settle an employee antitrust lawsuit over claims they conspired to suppress salaries by not recruiting one another’s workers.

The background to this is that the named companies (plus a few other that have already settled, like eBay ) agreed among themselves to not hire engineers away from their various rivals. It all got quite heated with Steve Jobs, for example, threatening to "go nuclear" if people continued to try to hire people away from Apple. And most of the people involved did seem to realise that they shouldn't be doing what they were doing. Eric Schmidt at Google for example sent an email insisting that perhaps this agreement shouldn't be written down anywhere. The only people we know of who were approached to join in but declined were Facebook, where Sheryl Sandberg decided it really wasn't a good idea.

As to why this is all such a bad idea it's because this sort of collusion is called a cartel. And they're generally agreed to be a bad thing except among those who decide to set one up. The reason is, as even Karl Marx was clever enough to work out, is because such collusion works against the interests of the workers. What determines the pay that any one worker can get is not their individual productivity (although the end result may end up looking very like that), nor legal action, but how much would some other employer be willing to offer him? It's that which gives the worker power over their current employer.

Now, if the largest employers in the area all agree not to try to hire workers away from each other then we get an employers' cartel. And power is taken away from those workers as a result. And that employers' cartel was quite keen on what they were doing. At one point Google refused to even accept job applications from people at Apple, over and above not trying to actively recruit them.

Over the time that this story has been playing out I've been very critical of the companies for having indulged themselves so. And I've also noted that in the European Union they could have been fined as much as 10% of their entire global turnover for their actions. This $300 million and change means I think they've got off very lightly indeed. For the really important point here is that if we're going to have a free market system then it really must be a free market. That means no cartels: for once a supposedly free market system is infested with such collusion it simply doesn't work very well any more.