Google, Apple settle conspiracy lawsuit for "a pittance"

Apple, Google, Intel and Adobe have collectively agreed to pay around $348 million (US$324 million) to settle a class-action lawsuit accusing them of conspiring to keep salaries down in the Silicon Valley tech hub.

The class-action lawsuit involved more than 64,000 software engineers. The plaintiffs had been seeking damages of about US$3 billion, and under US law, if the tech companies’ actions were deemed to be antitrust, damages could have been tripled to up to US$9 billion. The suit has been settled just weeks before the trial was due to begin.

In press statements, both Adobe and Intel have stated that they have decided to settle to avoid the uncertainties, costs and risks of litigation.

The four defendants had already admitted to forming six bilateral agreements to avoid poaching each others' employees, but have denied that the purpose was to depress wages.

These agreements first came to light during a Department of Justice investigation in 2010. The four companies, as well as Pixar and Intuit, were investigated over alleged agreements not to cold-call each others’ employees for recruitment purposes. Specifically, there were agreements between Apple and Google, Apple and Adobe, Apple and Pixar and Google and Intel. The companies settled the investigation, but the probe prompted the class-action lawsuit.

According to emails that have already been made public, the genesis for these agreements was former Apple CEO Steve Jobs’ anger at Google’s poaching of Apple employees.

In one instance, Job wrote to Google co-founder Sergei Brin stating that if Google hires a single member of Apple's Safari team, “this means war.” The emails show that Google fired a recruitment manager for cold-calling Apple executives looking to hire them.

Another potentially damaging email involved Google executive chairman Eric Schmidt advising a colleague to inform competitors about its no-cold-call agreement with Apple “verbally, since I don’t want to create a paper trail over which we can be sued later.”

Besides the financial motivation, the Los Angeles Times speculates that the settlement may be aimed at avoiding further embarrassment should more evidence such as these emails come to light.

Indeed, a Globe and Mail feature on the trial - written before the settlement was announced - states that the defendants “have aggressively tried to control what information would be presented.” In various motions, the companies had sought to label as inadmissible any testimony relating to Steve Jobs’ volatile personality, any mention of the Department of Justice investigation and any mention that Google and Apple are two of the most financially successful companies in the world.

NYMag’s Kevin Roose said the lawsuit and the ensuing publicity has “exposed the two-tier caste system within the top ranks of tech. There are the executives, who talk (and defer) to each other frequently and set the terms of engagement across the tech industry. And then there are the worker bees - the engineers, designers, and middle managers who are seen as valuable yet replaceable, who are essentially high-cost commodities, and who are routinely left out of some of the most important decisions surrounding their careers.”

Because tech workers are often well compensated for their work they often don’t notice when they’re being exploited in cases like these, Roose said. “But high tech salaries and plentiful perks don’t make the executives’ advantage taking any more ethical.”

The Weekly Standard called the size of the settlement “a pittance” compared to the four companies’ quarterly profits. “This conspiracy to depress wages - the companies steadfastly deny that was their goal - will prove a profitable venture. It is hard to imagine that paying each engineer a few thousand dollars in damages for the privilege of depressing his or her wages for a long period is not a financially sound purchase.”

Image courtesy of Brian Turner under CC