Software Engineers Don’t Deserve Antitrust Windfall

Once again, some of America’s most admired and innovative companies — in this case Apple, Google, Intel, Adobe, Intuit, Pixar, and LucasFilm — have fallen victim to an antitrust shakedown. Rather than face a jury at the risk of $9 billion in penalties, the defendants reportedly offered a total of $344 million in settlement.

The class action plaintiffs (more than 64,000 software engineers and other technical professionals, mostly in Silicon Valley) will now receive checks averaging around $5,000 (though individual amounts will actually vary widely). Problem is, they don’t deserve a penny of the windfall they’re about to receive.

What’s the case about? Well, it’s not about unpaid wages or broken promises. All of the programmers who joined the lawsuit routinely had their salaries paid in full. No, this is a smash-and-grab operation designed to generate paychecks for phantom jobs (or raises) that the individuals were never even offered.

It seems that between 2005 and 2009, the defendant high-tech companies agreed among themselves not to go “headhunting” among each other’s talent pools. So, for example, Google would not solicit Apple’s software engineers through unsolicited “cold calls” (though if an Apple employee contacted Google directly, Google would not turn them away).

By entering into such agreements, companies demonstrated that they valued the chance to snag new talent less than they valued a more stable workforce. Other companies (such as Facebook, which declined an invitation to enter a “no cold calling” agreement) reached different value judgments.

Enter the Sherman Antitrust Act of 1890, which prohibits “conspiracy” in “restraint of trade.” This pejorative language, evocative of backroom criminal schemes and rope-tied hands, bears no objective relationship to the facts on the ground. Each company was free to decide whether to limit its recruiting or not. Each employee was free to stay or seek employment elsewhere. Property and contract rights were respected all around. The companies simply chose to cooperate rather than compete, in a certain limited part of their business, hoping to make all the firms more productive.

None of that matters in the topsy-turvy world of antitrust, where practically anyone with a grudge can petition for a court-ordered rewrite of free market outcomes. The defendants, having been clubbed into submission with the threat of a $9 billion award, chose to settle rather than litigate. I can’t blame them, since the unpredictable antitrust statutes furnish no assurance of a just outcome at trial. But I do think each individual plaintiff should pause, before depositing his antitrust windfall, and ask whether they really deserve a paycheck from companies that chose not to recruit them.