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.