US Justice Department Sues EBay Over Alleged Antitrust Law Violation

 @ericbrownzzz on November 17 2012 6:22 PM
A pedestrian walks at the headquarters of eBay in San Jose
A pedestrian walks by the headquarters of eBay Inc. in San Jose, Calif. on Feb. 25, 2010. REUTERS

The U.S. Justice Department and California's office of the attorney general both filed lawsuits Friday against online auctioneer eBay Inc. (Nasdaq: EBAY). Each government agency has argued that eBay’s agreement not to recruit employees of Intuit Inc. (Nasdaq: INTU) is illegal.

In California's case, the complaint alleges that between 2006 and 2009 eBay and Intuit agreed not to recruit employees who worked for the other company, and eBay agreed not to hire any Intuit employees. EBay is based in San Jose; Intuit is headquartered in nearby Mountain View.

California Attorney General Kamala D. Harris said in a statement: “The pact harmed employees, and it harmed competition. If California is going to continue to be the high-tech capital of the world, we can’t allow anticompetitive conduct that prevents talent from going where it’s put to its highest use.”

The noncompetition agreement between the two companies was created with input from Intuit founder Scott Cook and former eBay CEO Meg Whitman, Reuters reported.

Cook was a member of eBay’s board of directors at the same time he was complaining about the online auctioneer’s recruitment of Intuit employees, the U.S. Justice Department said in a statement.

“EBay’s agreement with Intuit hurt employees by lowering the salaries and benefits they might have received and deprived them of better job opportunities at the other company,” said Joseph Wayland, acting assistant attorney general in charge of the Justice Department’s Antitrust Division. “The Antitrust Division has consistently taken the position that these kinds of agreements are per se unlawful under the antitrust laws.”

According to eBay, however, the agreement between Intuit and itself does not violate federal antitrust laws.

"EBay's hiring practices conform to the standards that the Department of Justice has approved in resolving cases against other companies. The DOJ is taking an overly aggressive interpretation in their enforcement of antitrust law in this area," eBay representative Lara Wyss told Reuters.

Intuit deals mainly in specialized finance and tax software, but the two companies routinely compete for talented computer and software engineers. However, neither the federal agency nor the state agency appears to have any formal interest in Intuit in the current case.

"We have already resolved any concerns that the DOJ had about our recruiting practices and believe the matter for Intuit is closed," Intuit representative Diane Carlini told Reuters. Intuit faced similar antitrust allegations in 2010 and settled them then.

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