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Antitrust and High-Tech: The Do-Not-Cold-Call List

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It has been the practice of some prominent Silicon Valley companies (and perhaps other companies as well) to refrain from “cold calling” employees of companies with whom they collaborate.  This seems like it could be a reasonable practice since companies may be less willing to enter into beneficial collaborations if they think their best employees can easily be stolen away.  In any event, the companies never agreed to refrain from talking to employees who expressed some interest in changing jobs (that would not be a cold call) or to refrain from hiring any of their collaborators’ employees, so the effect of these cold-call agreements was likely small.

Nevertheless, the Antitrust Division of the Department of Justice opened an investigation because it was concerned that the do-not-cold-call agreements were anticompetitive and had the effect of depressing wages.  That investigation is now complete and six major companies—Adobe, Apple, Google, Intel, Intuit, and Pixar—have settled with the DOJ and essentially agreed not to  enter into do-not-cold-call agreements for a period of five years.

We don’t know whether this is a good or bad settlement, but neither does the Division, because it didn’t look at the economic consequences of the do-not-cold-call agreements or of the settlement on wages or on competition.  Instead of looking at the evidence, which the Division would have done had it evaluated the case under a “rule of reason,” the Division viewed these agreements are per se violations of the antitrust laws.

These agreements could be anti-competitive, but they may also could be pro-competitive, for at least two reasons:  They remove a potential impediment to pro-competitive collaborations between companies.  They may also serve as some balance to California’s weak do-not-compete legal regime.  (Strong do-not-compete employment provisions are not enforceable in California).

The Division should have viewed this as a “rule of reason” case and evaluated both the potential pro- and anti-competitive effects of do-not-cold-call agreements.  Expanding the scope of per se antitrust violations in the absence of analysis can interfere with productive collaboration, efficient employment practices, and, ultimately, innovation in these critically important high-tech industries.