
How are cold-calling ceasefires illegal? - Navarr
http://blog.navarr.me/how-are-coldcalling-ceasefires-illegal
======
inerte
Read the Department of Justice press release about the case:

[http://www.justice.gov/atr/public/press_releases/2010/262648...](http://www.justice.gov/atr/public/press_releases/2010/262648.htm)

> The department said that the agreements eliminated a significant form of
> competition to attract highly skilled employees, and overall diminished
> competition to the detriment of affected employees who were likely deprived
> of competitively important information and access to better job
> opportunities.

Now, you may not _agree_ that it should be illegal, but the explanation is
right there in the document.

~~~
kinofcain
If that's the actual legal precedent set by these cases, then that's rather a
big deal, no? California's limitations on noncompete clauses are quite strict,
to the point of making noncompetes mostly worthless, but this is extending
that to nonsolicits, and extending it to all 50 states.

Regardless of what you feel about the case I think that's a huge change to the
current ecosystem.

~~~
mbreese
Non-competes are between an employee/employer. Non-solicits would be between
companies, in this case competitors. At least they are competing over the same
pool of employees. As such, it's likely viewed as collusion.

This isn't a big of a change to the legal precedents. This type of behavior
has been illegal for a long time. This is just the first time that I know of
where it's been this _public_ involving media-friendly companies.

------
Maxious
>“if your employees reach out to us or vice-versa they’re fair game.”

Not quite....

> "Not to pursue manager level and above candidates for Product, Sales, or G&A
> roles — even if they have applied to Google;"

[http://pando.com/2014/03/22/revealed-apple-and-googles-
wage-...](http://pando.com/2014/03/22/revealed-apple-and-googles-wage-fixing-
cartel-involved-dozens-more-companies-over-one-million-employees/)

~~~
zacharypinter
> While the later is certainly much more questionable on the legality
> standpoint

The author of this post seems to have acknowledged that part was suspect.

------
epc
Collusion with competitors to fix or restrict a price of a good in a market is
one of the easier antitrust cases to pursue, especially if it's nicely
documented in email.

Engineering salaries were likely depressed due to this non–compete cartel.

OPEC can do this with oil since it's not under US jurisdiction. US airlines,
for example, cannot phone each other up and say "Let's agree to price JFK-SFO
at $500 each way." They _can_ observe what each other charges for a given
ticket and make a decision to price their own fare accordingly, but they
cannot act in concert.

~~~
kkowalczyk
Pointing out the obvious: engineers are not "goods" that Google or Apple
produces.

Even if consider employees salary to fall under that dubious categorization,
good luck proving the salaries were "likely depressed" when during that period
the salaries went up. A lot.

It seems that it only affected lazy and apathetic engineers i.e. those who
couldn't be bother to send out a resume.

~~~
ryanobjc
Uh, goods are not just things companies produce, but also things they consume.
Therefore it could also include employees.

Also, if you have a look at the class action filing, the mechanism of action
is quite clear.

To lay it out, the way that salaries are set is for any given title (eg:
Software Engineer I), there is a pay range. Hiring managers do not have the
general permission to go outside the pay band. Under the interests of
fairness, these pay bands are adhered to fairly strictly.

So depressing the wages of even a sub-section of the employee pool helps keep
the pay band down.

While you may deem this a mere 'theory', there is evidence of it's affects.
Specifically that Google was forced to give 10% raises to their entire
employee when Facebook would not accede to a cold-call prohibition.

Your final sentence is not very complementary to your fellow engineers - often
times engineers are focused on the problem and unaware of their place in the
market. To call them lazy and apathetic is pretty mean spirited.

------
jbapple
> And I can’t even figure out how it’s illegal?

Are you a lawyer? If not, have you asked one? What research have you done to
try to figure out how it might be illegal? Have you read any laws or legal
articles about the subject matter?

------
sudhirj
Salaries, perks, and descriptions of interesting projects you might work on
are rarely public information. Quite often the only way I'd find out that I
could get a better deal and more interesting work at Company X is if they
reach out to me and tell me so. If my current company is blocking this, then
I'm being deprived of a very important source of information and
opportunities.

------
zedshaw
It's pretty simple. It's illegal for corporations to get together and decide
the price of things. This destroys the free market's ability to choose the
best product at the best price since all the products, despite their quality,
have the same price. This is the part of economics that says a free market
only works as long as everyone involved has equal information.

And remember, a free market means the _consumer_ has a right to choose, not
the _corporation_ has a right to trick consumers into buying at fixed prices.

In addition to price fixing products, companies also can't wage fix. If
corporations were allowed to get together and decide the max they'll all pay
certain employees then they can do...well exactly this. Also remember that
these companies _also_ refused to hire people who came to them, and _also_
ratted out those employees to their original employer. That goes beyond basic
wage fixing and into the realm of heinous employee rights violations.

The main reason all of this is illegal though is because the consumers and the
employees are not given all the information they need to decide. The key to
this important detail is in how all these sleazy assholes went around telling
each other to be quiet. If this action were something that was morally correct
they wouldn't need to hide it. However they knew that if the employees knew
they'd leave the company and it'd cost more to keep them. That's why the
companies kept the information from the employees.

More importantly though, if the consumers know about price fixing, they revolt
and entire industries collapse in huge meltdowns and the consumers stop
trusting the market. Politicians then react and pass laws against it so that
there isn't a huge economic revolt, or worse, a political bloody one.

Then again, programmers seem to worship corporations these days so I got no
idea how this will play out. Personally I hope we all boycott the shit out of
every company on this list, but that'll never happen as long as coders have
their heads firmly planted up Ayn Rand's ass.

The one thing that I'm enjoying coming out is how this is proving to
programmers that they are valuable. I think before this coders just kind of
thought of their value as just a typical cube farming wage slave. Now they see
that they're so valuable that corporations will go to very great lengths to
keep them from leaving and from paying them what they're worth.

That is definitely going to be interesting to watch play out.

~~~
brisance
>>It's pretty simple. It's illegal for corporations to get together and decide
the price of things. <<

Is this not how LIBOR or the Fed rate is determined?

~~~
epc
The L in LIBOR stands for London. Which is not in the US. And the theoretical
basis for LIBOR was that the BBA called various banks to see what they'd
offer. What we've since learned is that the various banks would chat with each
other to see what they needed LIBOR to be and then conspired to set LIBOR.
Which is why there's various prosecutions underway.

The Fed rate is determined by the Fed. Which is a US Government entity. And is
its responsibility. So not even remotely close to the same thing

~~~
brisance
Digressing a little, but since you are talking about jurisdiction then yes
it's a fair point albeit splitting hairs. But from a morality point of view
isn't it incompatible with the parent's view that certain values should be
universal?

The Fed is not a US Government entity. It operates within rules created by
Congress but is not beholden to Congress or any branch of the US Government.
The board holds meetings and the Chairman reports to Congress once in a while
but they have more or less a free hand in running things.

"As the nation's central bank, the Federal Reserve derives its authority from
the Congress of the United States. It is considered an independent central
bank because its monetary policy decisions do not have to be approved by the
President or anyone else in the executive or legislative branches of
government, it does not receive funding appropriated by the Congress, and the
terms of the members of the Board of Governors span multiple presidential and
congressional terms."

[http://www.federalreserve.gov/faqs/about_14986.htm](http://www.federalreserve.gov/faqs/about_14986.htm)

------
beedogs
Misrepresenting what happened in order to strawman it, and then self-posting
it to HN.

Fantastic way to get hits, I guess.

~~~
Navarr
No need for hits. It's a tiny blog.

Relevant xkcd though: [https://xkcd.com/1053/](https://xkcd.com/1053/)

------
zacharypinter
I think there's two aspects to this discussion that keep getting muddled
together.

1\. Were the individuals at the companies in question knowingly acting outside
their own ethics or the ethics they portray themselves as having? Was there
something "sinister" about this?

2\. What harm did these actions cause and do we need to do something to
prevent such kinds of harm in the future?

A lot of #1 sounds like execs trying to manage the relationships with the
companies they worked with. It doesn't sound like there was a big taboo around
these types of do-not-solicit agreements at that time, and with all the
players aggressively trying to hire and hold onto experienced employees I can
see how finding out that a partner company was targeting the employees you
were trying to keep around could be interpreted as a hostile/unfriendly
business move. The most damning thing I've come across regarding #1 was the
email about taking the conversation offline to avoid a paper trail. Would love
to read more about the context of that.

I wasn't sure about #2 at first, but after all the discussion I've been
strongly persuaded that this is a net negative for the software industry. The
lawsuits and public outcry will hopefully create a strong taboo against this
sort of behavior in the future, in addition to clarifying the legal
ramifications. Is there anything more that needs to be done here?

------
EGreg
Wait so it's illegal to agree not to cold call each other's employees and let
them apply for a job if they want?

If that's all they did, what would be illegal? How is that price fixing?

That's like saying stores agreeing not to advertise inside each other's
premises are a cartel. Those companies can still advertise their openings just
not actively poaching each other's employees.

~~~
trekky1700
Essentially, think of the reason for Google to want this. They essentially
want to keep their engineers with them for a lower price while preventing
other companies from offering more attractive positions/salaries which would
mean either Google would have to match the salary, or they'd lose the
engineer.

A lot of hires and promotions are made through these sorts of offers. Steve
Jobs famously courted John Sculley from Pepsi. Do you think Marissa Mayer
applied for her role at Yahoo?

These sort of agreements restrict the market and are unfair to engineers.

~~~
EGreg
Ok I guess if the market gets out of control with everyone poaching each
other's customers blatantly, then any agreement to scale back is considered an
illegal cartel?

So if for example stores advertise massive discounts in front of each other's
premises specifically for the customers about to make a purchase at the
competing store, then two stores agreeing to stop and go back to simply
letting shoppers DO THEIR OWN RESEARCH is a cartel?

~~~
dlss
Yes?

I get the feeling you're being rhetorical, but if I remove the tone in my head
then: yes, clearly.

> out of control with everyone poaching each other's customers blatantly

Corporations shouldn't own customers... Like, the way you poach one is by
offering a better deal (more features, better price, better service, etc). I
think the way an economist would see the situation you are describing there is
a "functioning market" \-- the way that an economy improves customers life.

If AMD releases a new processor and "steals" a ton of Intel customers that's a
good thing. The customers get better processors which they use in their own
economic contributions. If Intel steals them back by releasing an even better
processor, that's also fantastic. If that process repeats it's not "out of
control" \-- it's the world becoming better.

This dynamic (competition) is the reason why capitalistic societies have done
so well in the last two centuries. It's the reason why the quality of the
goods you use continues to increase while the price drops.

When corporations make an agreement to stop competing on any dimension, that
dimension suffers. Maybe you're saying you don't care about this particular
dimension. If that was true in general (ie no consumers care about the
dimension), then the _agreement wouldn 't be necessary_ since competing on
that basis would have no effect.

~~~
EGreg
I guess our disagreement is in the word "offering".

I can advertise an offer in many places, but just because I agree not to
advertise an offer in a particular place (eg right outside a rival movie
theater, and vice versa) doesn't mean I don't OFFER something. It may mean
that we agree not to degrade the experience for one another's customers.

Are you saying that a world where people are hit with AMD ads as soon as they
exit the Intel store is a better world? Well why don't companies go the other
way then -- agree to tell each other every time you purchase something and
share your purchase data without your consent. I hope you like to receive spam
mail every time you buy something, from competitors.

Please explain why men seducing each other's wives at every opportunity would
lead to better deals for wives.

~~~
dlss
> Are you saying that a world where people are hit with AMD ads as soon as
> they exit the Intel store is a better world?

Assuming the ad runs profitably, yep. Customers are changing their buying
patterns for a reason.

> Well why don't companies go the other way then -- agree to tell each other
> every time you purchase something and share your purchase data without your
> consent.

You answered your own question by including "without your consent". The with
consent version does happen though -- it's not unheard of for a knowledgable
salesperson to recommend a different product than the one they are selling.

> I hope you like to receive spam mail every time you buy something, from
> competitors.

This is quite a leap from your previous example. Did you grow tired of it?

> Please explain why men seducing each other's wives at every opportunity
> would lead to better deals for wives.

Please explain why women get remarried.

~~~
EGreg
>> Please explain why men seducing each other's wives at every opportunity
would lead to better deals for wives.

>Please explain why women get remarried.

Answering a question with a question? This is a non-sequitur. While there are
many reasons for women to get remarried, to make your point you have to show
that it's better for women when men actively try to seduce each other's wives
at every opportunity. After all, women are perfectly capable of discovering
other men themselves, especially if the men advertise their availability and
offers in various well-known places. The men don't need to cold-call other
men's wives specifically trying to poach them. There's a big difference.

Illustrate to me economically why the world where men are specifically cold-
calling other men's wives is a better world due to the increased "competition"
by men.

If we take this logic even further, perhaps ever-more-clever ways of men
sabotaging the others' relationships with their wives would have even BETTER
results for the wives, because they are more "competitive"? Doesn't this have
diminishing returns?

~~~
dlss
> to make your point you have to show that it's better for women when men
> actively try to seduce each other's wives at every opportunity

Not really. The point actually should read "men making an agreement not to
flirt with married women would be worse for married women as a whole".

Note this differs from your version in two important ways:

A1. The group that is benefited is _not_ women, but married women

A2. "Every opportunity" is replaced with "where the man in question believes
it is a good idea"

And the version with those modifications is clearly true.

High level argument:

B1. the cost to happily married women isn't particularly high (they stay in
their relationship, feel flattered, have a fun conversation, etc)

B2. the cost to unhappily married women would be particularly high (since they
have less knowledge about potential alternatives / may stay in a bad situation
longer due to lack of information)

I'm not sure what the exact population sizes are for those two groups, but by
using the divorce rate as a quick proxy we can see it's a high enough ratio to
be net positive. Hence it would be better.

(If you are thinking about talking about obnoxious flirting, I will point you
to A2 above)

FWIW "Please explain why women get remarried" is just a shorter version of the
above argument -- the reason men not flirting with married women is bad for
married women as a whole is because some would get remarried.

> If we take this logic even further, perhaps ever-more-clever ways of men
> sabotaging the others' relationships with their wives would have even BETTER
> results for the wives, because they are more "competitive"? Doesn't this
> have diminishing returns?

You talk about straw men in other threads. Do you really not see the straw man
in your last two replies to me? No one is arguing that Apple should seek to
harm the way that Google's employees feel about Google except in true ways
("Google is paying you 20% less than market" is good if true in much the same
way as "Greg is cheating on you" is good if true. Both are of course bad if
false)

~~~
EGreg
Well let's take this context of married women for example. The reality is that
there are many men who do not have any qualms about "trying to seduce" a
married woman.

[http://www.youtube.com/watch?v=FKfMqwSMI4U](http://www.youtube.com/watch?v=FKfMqwSMI4U)
(I just had to link this :-)

These men do not "respect" the institution of marriage or the religious views
on adultery etc.

There are entire forums on the internet devoted to "how to get a girl in a
relationship" with "boyfriend destroyer routines" or whatever.

The idea is that an institution employing experts with lots of experience in
poaching employees, is going to have an unequal advantage over the employee,
and is likely to entice them either through souring their relationship with
their current employer (maybe telling an employee about how Apple's workers
are treated in China, for example) as well as using psychological tricks to
lure them away.

Flirting is one thing. Blatantly propositioning in front of the husband when
he's ware of it is something else. Most people draw a line not because they
want to flaunt some antitrust law, but because of biological / economic
emergent actions.

[http://arxiv.org/abs/1201.3798](http://arxiv.org/abs/1201.3798)

~~~
dlss
So you're saying in your mind accepting a job is like committing to a
marriage? "Till death do us part" and all that?

You can moonlight as an employee, so at the very least you have to agree it's
like a swinger/open marriage. I don't know the protocol there, but I'm
guessing blatantly propositioning someone in an open marriage falls in to a
different category than a closed one. It's much closer to talking to someone
who's single.

re: unequal recruiting skill level vs the employee. Are you now taking the
position that recruiting is immoral in and of itself?

~~~
EGreg
Recruiting involves many things and what is considered moral is relative. An
HR dept will pay recruiters to advertise in APPROPRIATE places and screen
candidates, do background checks, set up a pipeline etc.

If the recruiter is instructed not to advertise the company's openings in
strip clubs or porn sites, that isn't illegal or immoral. This is how I view
instructing the recruiters not to advertise on their competitor's website or
target other company's employees. Perhaps they think the cost of bad
reputation or reprisals from those companies was too high. It doesn't have to
be a "conspiracy". As I posted, an arxiv article shows that cartels are a
natural emergent phenomenon of markets.

As far as marriage - there was a time when people worked decades for a company
and earned a pension. These days esp in the tech industry those days are long
gone. Poaching is an additional cost of hiring employees. You want to increase
this cost - fine, and it will be passed on to the employees and depress their
salaries. Your argument that the correlation is the other way is sofar without
basis. I am not arguing that it is not illegal - the courts should decide
that. I am saying this enforcement goes contrary to the purpse of the law and
no one wins.

~~~
trekky1700
So you're saying other companies offering tech workers high salaries will
lower their salaries? I think you're missing the point.

~~~
EGreg
Yes if we're still talking about poaching, it creates downward pressure on the
salaries of everyone else.

There are certain costs associated with hiring someone. Such as:

1) Recruiting 2) Interviewing 3) Onboarding and introducing to team 4)
Provisioning equipment, office, etc. 5) Ramping up and getting integrated

Now, if these costs are paid per employee, then the longer this employee works
with us, the more valuable they become and the more money they can make.

BUT

Those employees that get poached, or "fail upwards" into other companies, or
whatever, actually make that position cost more. Way more. And I am not just
talking about the fact that they might leave mid-project or have a moral
hazard of screwing up a project knowing they'll have their next job to fail
upwards into. But something even more basic.

For example if I have to pay the cost of 1-5 once every 3 years, that's 3
times less than if I have to pay it every year. So will I bear the full cost
of 1-5 every time or pass it on to the employees I hire into that position? Of
course I would pass it on, and moreover I can justify it by saying that they
don't have "seniority within the organization" or that we are a meritocracy.

So you are completely neglecting this side of the phenomena, and blindly
claiming that salaries will go up because poaching increases. It's not at all
obvious that they would!

~~~
trekky1700
You're neglecting the fact that not every "poaching" attempt is successful and
the fact that companies like Google have an incentive to keep salaries high in
order to prevent poaching.

~~~
EGreg
I didn't neglect that. How do these facts rule out that successful poaching
imposes an additional cost per employee on companies? Paying employees a
larger salary doesn't prevent poaching if your opponent can do the same.
People are more likely to fail upwards and projects are more likely to cost
more and be finished later because of successful poaching. Who bears this cost
and how?

------
codezero
Because those employees deserve to earn more money from a company that is
willing to offer it to them.

~~~
alecbenzer
But they weren't willing to offer it to them. They _might_ have been, if it
didn't mean competitors might start poaching, but it did mean that.

~~~
ArtDev
If you don't work there anymore its not poaching. It applied to former
employees as well.

~~~
alecbenzer
s/poaching/poaching or hiring former employees, if that's the case

------
qq66
It's illegal if a court says it's illegal. Whether a particular person can
think of a good reason for something to be illegal doesn't factor into the
picture.

------
ArtDev
Wrong. 1) It also applies to former employees. 2) Like monopolies, corruption
and price-fixing its bad for the free market.

Steve Jobs knew it was illegal and wrong.

------
spiritplumber
As in "You stop cold-calling me, I cease firing on you"?

Not sure why that would be illegal.

------
ASneakyFox
This marks the decline of hn. Experiment over I guess. Now where do I go for
news?

------
outside1234
It doesn't have to be illegal to be unethical.

~~~
alecbenzer
It also doesn't need to be unethical to be illegal.

------
michaelochurch
First of all, even if it weren't illegal, it would still be extremely sleazy.

Second, many people who do objectively illegal things (a) are subtle enough
about it to leave doubt and (b) rarely will be caught on the totality of
evidence that would convict them. If they leave enough of a trail to prove
them guilty on the small things they don't care much about, what are they up
to that's hidden from view?

Let's take extortion. Real-world extortionists don't say, "give me money or
I'll shoot up your storefront." Making it that obvious will put them in jail.
Accidents and annoyances occur, with escalation over time. Rumors are spread,
often by the extortionist, that the extortionist is taking interest in the
business and will demand payment. Someone goes in, hits his head on the side
of the door and demands recompense. Or the extorted party is asked to purchase
"protection" services. White-collar extortion tends to focus on reputation
rather than physical violence, and the services are dressed as some kind of
consulting, but it's a similar game. It's hard to convict because most
criminals can stay just on the right side of the line, at least in terms of
where they leave a record.

Is this a price-fixing cartel? No, not quite (at least, not from what we
know). However, if people are being instructed to follow no-poach agreements
and terminated when they break them, it's quite likely that these networks of
collusion are being used for worse things, like blacklisting. A no-poach
agreement denies career opportunities to people who would otherwise have them.
without their knowing why the opportunities are not there or even that it is
occurring. That's a big deal. It makes it not unlikely that these companies
are also blacklisting, say, people who might support collective bargaining for
engineers or who otherwise fight for themselves. Shit, I might be on a PITA
list somewhere.

Those sorts of probably illegal collusive arrangements exist all over the
Valley, especially among venture capitalists who compare notes on prospects
instead of competing on a fair market. Indeed, most of what VCs do would be
highly illegal (insider trading, market manipulation, pump-and-dump, use of
negative rumor to punish and intimidate) if it pertained to publicly traded
stock rather than private equity.

This is a major issue. Even if not illegal, it's still sleazy and shameful.

