Google, Apple, and Other Tech Titans’ Wage-Suppression Conspiracy Estimated to Cover One Million Workers

You have to give credit where credit is due. Technology leaders like acting on a grand scale, and that apparently includes when they engage in criminal conspiracies. As a price-fixing case against the some of the America’s most celebrated companies moves forward, the estimate of the number of employees victimized has grown ten-fold, to nearly one million.

By way of background: the Obama Administration looked to have gotten a spine infusion in pursuing an anti-trust case against Silicon Valley’s elite for conspiring to lower wages of tech rank and file workers. The Department of Justice’s charges hold up pointed to slam-dunk criminal violations. Recall that an early 1990s price rigging investigation involving lysine and citric acid at ADM led to $100 million in fines and jail time for top executives, including the vice chairman, who was also the heir apparent, and criminal fines from other corporate co-conspirators. But this being Team Obama, the tech big boys are getting off on the cheap, with the DoJ content to have them swear that they won’t engage in this sort of bad behavior again.

And don’t labor under any illusions about who was responsible for the pay-suppression deals. Just like the ADM case, this scheme was conducted at the highest level of the participating firms. As we wrote in January:

The government’s case, as summarized by Mark Ames at Pando, is chock full of damning e-mails among top executives, which reveal Steve Jobs to have been the lead actor and main enforcer of the pay-containment pact, which dates to 2005. But its real mastermind was George Lucas, who had a similar scheme in place in the 1980s and enlisted Jobs when he sold the computer animation division of Lucasfilm to Pixar.

Ames highlighted this section from the filing:

George Lucas believed that companies should not compete against each other for employees, because ‘[i]t’s not normal industrial competitive situation.’ As George Lucas explained, ‘I always — the rule we had, or the rule that I put down for everybody,’ was that ‘we cannot get into a bidding war with other companies because we don’t have the margins for that sort of thing.’

Translated, Lucas’ wage-reduction agreement meant that Lucasfilm and Pixar agreed to a) never cold call each other’s employees; b) notify each other if making an offer to an employee of the other company, even if that employee applied for the job on his or her own without being recruited; c) any offer made would be “final” so as to avoid a costly bidding war that would drive up not just the employee’s salary, but also drive up the pay scale of every other employee in the firm.

Jobs held to this agreement, and used it as the basis two decades later to suppress employee costs just as fierce competition was driving up tech engineers’ wages.

This is the guts of the government’s allegations:

Between approximately 2005 and 2009, Defendants Adobe, Apple, Google, Intel, Intuit, Lucasfilm, and Pixar allegedly engaged in an “overarching conspiracy” to eliminate competition among Defendants for skilled labor. The conspiracy consisted of an interconnected web of express bilateral agreements….Defendants memorialized these nearly identical agreements in CEO-to-CEO emails and other documents, including “Do Not Call” lists, thereby putting each Defendant’s employees off-limits to other Defendants. Each bilateral agreement applied to all employees of a given pair of Defendants. These agreements were not limited by geography, job function, product group, or time period. Nor were they related to any specific business or other collaboration between Defendants.

Consider what this means. Here we see the companies that are touted as the epitome of American entrepreneurship, who supposedly fetishize finding and nurturing the best “talent,” instead focusing on containing worker wages as they way to bolster their profit. That’s apparently easier than making superior products.

Mark Ames has been following this case, and he filed an update over the weekend. Even though the government settled its case, workers filed a class action suit against the tech giants. Discovery in that case has revealed that the scope of the collusion was vastly larger than originally thought. The government originally pegged these pacts as lowering the pay of roughly 100,000 workers, to the tune of $9 billion in total. The private plaintiffs have since determined that far more companies were participating, and that as many as one million workers were included in this racket. It also turns out that the government peculiarly neglected to include some of the companies it investigated from its lawsuit, when the private plaintiffs believe that they engaged in similar conduct. From Ames’ article:

Confidential internal Google and Apple memos, buried within piles of court dockets and reviewed by PandoDaily, clearly show that what began as a secret cartel agreement between Apple’s Steve Jobs and Google’s Eric Schmidt to illegally fix the labor market for hi-tech workers, expanded within a few years to include companies ranging from Dell, IBM, eBay and Microsoft, to Comcast, Clear Channel, Dreamworks, and London-based public relations behemoth WPP. All told, the combined workforces of the companies involved totals well over a million employees.

According to multiple sources familiar with the case, several of these newly named companies were also subpoenaed by the DOJ for their investigation. A spokesperson for Ask.com confirmed that in 2009-10 the company was investigated by the DOJ, and agreed to cooperate fully with that investigation. Other companies confirmed off the record that they too had been subpoenaed around the same time.

Although the Department ultimately decided to focus its attention on just Adobe, Apple, Google, Intel, Intuit, Lucasfilm and Pixar, the emails and memos clearly name dozens more companies which, at least as far as Google and Apple executives were concerned, formed part of their wage-fixing cartel.

And this part is classic:

Later that year, in September 2005, eBay CEO Meg Whitman called Schmidt complaining that Google’s recruiters were hurting profits and business at eBay. Schmidt emailed Google’s “Executive Management Committee”—the company’s top executives— summarizing Whitman’s, and “the valley”’s view that competing for workers by offering higher pay packages was “unfair”

So CEOs can get egregious pay packages, but pay a premium to lure someone away to a better job? Oh, can’t have that, now can we?

And notice that this allowed the conspiracy to widen, even to companies who may not have signed agreements with Apple and Google. Ames again:

Some of the companies Pando contacted for this article insisted, off the record, that they had not agreed to appear on Google or Apple’s lists, and that there were no reciprocal non-solicitation agreements. Indeed, that same line of defense was used by many of the defendants in the current case.

Of course, it’s possible that Google, Apple or others simply added companies to their don’t recruit lists without coordinating with them first. That said, as we see from the Whitman and Jobs emails above, addition to the list was frequently prompted by an angry phone call or heated discussion.

And those angry calls often came from the CEO.

Ames points out that it’s hard to muster sympathy for well-paid tech workers but stresses that they have more in common with McDonald’s employees than you might think:

What’s more important is the political predicament that low-paid fast food workers share with well-paid hi-tech workers: the loss of power over their lives and their futures to the growing mass of concentrated power in Silicon Valley, whose tentacles are so strong now and so great, that hundreds of thousands of workers around the globe—public relations and cable company employees in the British Isles, programmers and tech engineers in Russia and China (according to other documents which I’ll write about soon)—have their lives controlled and their wages and opportunities stolen from them without ever knowing about it, all the while being bombarded with cultural cant about the wisdom of the free market, about the efficiency of free knowledge, about the need to take personal responsibility and to blame no one but yourself for everything that happens in your life and your career.

I find myself needing to quote railroad baron Jay Gould at every turn: “I can hire one half of the working class to kill the other half.” Stoking jealousies among the lower orders is a great way to divert attention from who is really making out like bandits, and it’s not mid-level technology staffers who live in the most overpriced housing market in the US. Envy is the enemy of solidarity, and we need to cultivate more common initiatives if we are to have any chance of curbing the power of our oligarchs.

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29 comments

  1. YankeeFrank

    Obama is such a pungent CEO whore. Its unbelievable that the DOJ would settle for a promise with these troglodytes, but then so much of what Obama has done is unbelievable. The settlements in these cases should be astronomical at least. And for anyone who thinks the engineers, etc. whose salaries and careers were curtailed are rich, most of these employees make around $100k, and as Yves points out, they live in some of the most expensive areas in the country. They are not getting rich from these jobs at all, and that’s the whole point of the exercise: to control workers and keep them from gaining any real power. Perhaps some of these guys will now start to appreciate things like labor unions and give up the libertarian wankfest that is apparently so popular up there in Silicon Valley.

    1. R Foreman

      Clearly what he his hiding and avoiding is more heinous, more damaging and sweeping than being branded the POTUS who trash the US Constitution, stole $Trillions from the public, and presided over a coup which cinched a strangle-hold over all the rank and file, such that it would be impossible for them to fight back, and he is willing to accept this historical legacy of his presidency.

      I’m guessing that if some of these things were actually pursued in a legal fashion, it would usher in such a period of violent upheaval that our government, indeed our entire money-class system would be toppled, and the continued enslavement of 99% of the US population is seen as preferable to that. Welcome to peonage comrade.

    2. panikwerks

      Let’s also not forget that many of these jobs require greater than 40 hour work weeks. Since these workers are not paid overtime, the hourly compensation is quite modest.

      1. jrs

        Exactly. That was laws screwing the workers as well – having laws that tech work should be salaried. It shouldn’t. It’s not managerial.

        1. hunkerdown

          “managerial” = “nominal management chain is generally incompetent to meaningfully evaluate the position’s work product”

    3. jrs

      Yes unionization. Libertarianism? Well some libertarians believe in unions, but this is a clear case of needed unions and worker solidarity.

  2. Marianne J

    I wonder how these discoveries affect ongoing employment lawsuits that would have normally settled in favor of the company due to the assumption that employment contracts are at-will? If the labor market no longer functions completely at-will for both the employer and employee (employees are not entirely free to leave for another company due to wide-spread employer collusion, even if their employer wasn’t a part of the collusion) I see many court cases potentially falling in favor complainant employees who can prove that their job type was affected by the collusion, assuming that they can introduce this as evidence in their case. This is on top of the lawsuit specially raised to address the collusion. Ramifications could extend to employers far outside those listed above. A collusion in the marketplace warps the entire marketplace.

  3. John

    Lucas, how could he?! Then again he is the same guy who paid the man behind the Darth Vader mask so little for the role and then stiffed him on the royalties for movies and merchandise that made billions. Lucas brought new meaning to an old oligarchy labor practice.

  4. Zac

    Obama and the tech company CEOs had a big meeting this week. Is it really too much to think that maybe the “spine infusion” the administration has gotten in pursuing this case is about creating leverage over the big tech companies vis-a-vis the NSA (ie ‘shut up, get in line, and maybe we can settle this’)?

    1. jrs

      I suspect so. Why were so many tech companies (including things like Amazon) allowed to pay so little in taxes for so many years thus nurturing their growth? Why are they given a slap on the wrist for this price fixing? Not to even mention the cheap labor they are allowed to import. What are the chances it’s because they are in with the government? What are the chances It’s tit for tat for the spying? Co-partners?

      1. hunkerdown

        Never attribute to malice that which can be adequately explained by perverse payoff matrices.

  5. Skeptic

    That story is a perfect bookend for last week’s revelation regarding Wells Fargo’s Mortgage Crime Manual. More and more evidence of an ever expanding Corporate Crime Wave.

    And kudos to NC for pointing out: “Here we see the companies that are touted as the epitome of American entrepreneurship, who supposedly fetishize finding and nurturing the best “talent,” instead focusing on containing worker wages as they way to bolster their profit. That’s apparently easier than making superior products.”

    Techno Saint Steve Jobs (cheap ones) and his cohorts are nothing more than price fixers and oligopolists.
    Also striking is the similarity of this underground conspiracy to the above ground monopolies of Professional/Collegiate Sportz. How the guys who make Widgets must envy the Sportz Oligarchs and their legalized monopolies.

  6. Jessica

    “our oligarchs”
    I am glad to see this term coming into use. It is the most accurate one.

  7. PaulArt

    With the advent of the H1-B visa these issues are non-existent. You can get someone way cheaper from China, India or Russia by promising them a green card. Case closed. You could also grow talent (like they used to here in the great USA once upon a time) by scrutinizing your employees in your offshore centers at Bangalore and Mumbai and China and import the top performers to the USA, work them to death for a few years and ship them back after burn out. If you are Walmart then you would also completely handover this entire responsibility to someone like Infosys who will maintain and run an entire phalanx of software engineers purely for maintaining and working and improving your software for pennies on the dollar. Software Engineers who are brought here on this basis and who work in Walmart’s Arkansas Bentonville office or GE’s Louisville Appliances plant for instance are not even given a penny when they move back to India or they move here from India. They do it all on their own money. They only get a paid airline ticket when they come here and when they go back. Neat, uh? And, would you like to take a guess at how much these hapless people are paid? I thought not. The hilarious part is, these engineers who come here from India or China,consider it the crowning achievement of their career because it is only the best of the best who are chosen to come here. I was recently chatting with my Mom back home in India and she told me that enrollments in Computer Science and Computer Engineering has fallen in India because the wage levels have dropped so low for Software expertise. The starting salary for many of these engineers today is around $4000 per year or even less depending on the size of the company. Now here is the kicker, the bigger companies like Infosys and Tata Consultancy Services have now taken to using the same technique of robbing their employees like our American CEO comrades by cancelling annual raises. This seems to be a recent trend, completely cancel annual raises by claiming that it was a bad year, but the CEO and the Board walk away with some sizable raises and stock options. USA is exporting everything that is anti-middle class and anti-progress to the rest of the world. We have entered a very very dark phase of social backwardness thanks to the worthies of Wall Street.

  8. Banger

    Can we really blame companies for doing this sort of thing? Workers, for a number of cultural reasons, don’t want to form or join labor unions. Without unions as a counter-force how are workers going to assert themselves?

    1. jrs

      Quite honestly I wonder how many I.T. people have really been exposed to the concept of unions and what they are for (unlessthey are very political and very left). I’m not sure it’s always rejected for hard ideological reasons as in many cases not part of the mental model at all. It’s just “people in professional jobs don’t unionize”.

      1. hunkerdown

        There very definitely is or at least was a rockstar culture pervading the place, and collectivism seemed effectively forestalled by that particular autistic flavor of individualistic arrogance (though the prima donnas may have been shaken out in favor of mainstream, pack-oriented brogrammers) and the golden fingercuffs of stock options. “I’m making plenty, why should we collectivize?” they said, even as they were developing the software that made all that offshoring possible.

  9. Dan Kervick

    There is definitely more here waiting to be learned. I hope reporters keep digging aggressively, since this settlement smacks of a cover-up deal designed to keep “the valley” from playing other cards. These folks have been sending oodles of cash to the politicos over the past couple of decades, and are also enmeshed with the new information state. I’d bet my last dollar that important, compromised political figures knew about this labor market collusion, as well as other deals.

  10. BondsOfSteel

    Funny that most of these actors are such outspoken advocates of Laissez-faire free market policies. I guess it’s cool to believe in the free market… except when things cost more than you’d like to pay.

    I think what they really want is rigged markets. This seems to be the New [Old] Capitalism.

  11. james macdonald

    Google, Apple support of all forms of increased immigration quotas is hugely more significant than this as a wage suppressor.

    1. paul

      But they don’t want their ‘competitors’ stealing them when they get here.
      That would be a form of intellectual property theft, ‘the supreme crime’.

  12. tommy strange

    Thanks yves,
    I an anarchist of the IWW type, and I’ve been on this boat for over a year. Having met so many well paid ‘tech’ people in occupy and before, I knew this was a wrong tactic to take for local activists, of which many call themselves anarchists. The google bus yes, using bus stops we pay for and DOUBLING THE RENTS near the stops…but as a whole, NEVER damn a work sector no matter how much more they make then you, and no matter how goddamn annoying so many of them are. I think I did some work, via Facebook and via personal emails to get the ‘bigger picture’ injected. Amazing how far ‘left’ you and your readers are these days. Well times can determine humanism and critical thinking I guess. Unfortunately you still have people like Solnit, doing this crap. Amazing how ‘respected’ she is among the ‘left’ working class and middle class she still is. Even after that election article. Ugh!! I’m working on organizing with people more angry about the big picture. Not some dweebs that will be outta work in a year or so anyway.

    1. LY

      Yes, it’s free market, since the government isn’t the one doing it.

      I find this to be the Austrian’s major blindspot. Enforcement for anti-trust and monopolies is ignored – in fact, existence of either is blamed on government.

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