IT HAD promised to be an explosive trial, exposing a dark side of Silicon Valley. But on April 24th a settlement was reached between 64,400 tech workers and Google, Apple, Intel and Adobe Systems, which stand accused of conspiring between 2005 and 2009 to restrict the pay of their staff by, among other things, agreeing not to poach rivals’ workers. Although the proposed settlement, rumoured to be worth $324m, should spare the firms from a court battle due to start next month, the legal jousting leading up to it has revealed evidence of discussions they would no doubt have preferred to keep secret.
These exchanges are principally in the form of e-mails between various executives including the late Steve Jobs, Apple’s former boss, Sergey Brin, a co-founder of Google, and Eric Schmidt, a former chief executive of the internet giant. (Mr Schmidt, who is now Google’s executive chairman, is a board director of The Economist Group.) For example, in an e-mail sent after a Google recruiter tried to hire an Apple employee, Mr Schmidt told Mr Jobs that the recruiter would be fired. Mr Jobs then forwarded the e-mail to an Apple human resources executive, adding a smiley-face emoticon.
Inside Google, discussions about do-not-poach deals were clearly treated as sensitive. Court documents show that in one exchange, Mr Schmidt told a colleague that he preferred that information about such agreements be shared verbally in order to avoid creating a paper trail.
Lawyers for the firms targeted by the lawsuit have disputed allegations they were deliberately trying to drive down wages. Adobe and Intel have said they decided to settle in order to avoid the risks involved in litigation. All of the firms had already settled a similar case brought by America’s Justice Department in 2010. And the risks grew even further last year when Pixar and Lucasfilm, two film studios, and Intuit, a software firm, reached a $20m settlement in a case involving claims that they had struck no-poaching agreements.
This week’s settlement will need to be approved by a judge and more details of its contents are likely to surface in coming weeks. The amount involved may seem like a lot of money, but the lawyers for the plaintiffs had been arguing for $3 billion of damages—an amount that could have risen to up to $9 billion if the companies were to be found guilty of anti-competitive behaviour during a trial.
The episode is certainly a salutary reminder that tech’s behemoths need to be watched very carefully. Silicon Valley often breeds intense rivalries between firms, which spur innovation and produce game-changing products. But it is also a small world in which top executives often rub shoulders with one another on boards, at charity balls and as co-investors in startups.
The good news is that some of those young firms turn out to be rebels with little respect for the establishment’s rules. Court documents in the latest case show that Google approached Sheryl Sandberg, Facebook’s chief operating officer and a former Google employee, to see if the then small-but-fast-growing social network would agree to a no-poaching deal too. Facebook said no.
