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DOJ Ends Lucasfilm's No Cold Call Agreement With Pixar: May the Market Force Be With You

    Client Alerts
  • December 31, 2010

This article is an edited version reprinted from Parker Poe's Antitrust and Competition Reporter.

The Department of Justice announced on December 21 that it filed a complaint against Lucasfilm Ltd. regarding an alleged agreement between Lucasfilm and Pixar that restrained employee recruitment and hiring between the two companies. The complaint is an off-shoot of DOJ's prior investigation into the employment practices of high tech companies such as Adobe Systems, Inc. and Apple Inc. DOJ further announced that same day that it had entered into a settlement with Lucasfilm regarding this alleged hiring practice. Lucasfilm has denied liability.

In its complaint, DOJ asserts a claim under Section 1 of the Sherman Act, related to Lucasfilm's alleged agreement with Pixar not to solicit each other's employees. DOJ contended that Lucasfilm and Pixar entered into a three-part protocol that restricted the hiring of each other's employees. Under this protocol, DOJ alleged that Lucasfilm and Pixar agreed that they would not cold call each other's employees, that they would notify each other when making an offer of employment to an employee of the other company and that when making an offer of employment, neither company would counteroffer above the initial offer. According to DOJ, this agreement, which began in 2005, "disrupted the competitive market forces for employee talent" and was a per se violation of the Sherman Act.

DOJ takes the position that restraints that are broader than necessary to achieve efficiencies of a business collaboration will be treated as per se unlawful. In addition, DOJ further noted that the relief obtained against Lucasfilm would not prohibit the use of direct solicitation provisions by Lucasfilm that are reasonably necessary in certain contexts, including in mergers or acquisitions, contracts with consultants, settlements of legal disputes or legitimate joint ventures, among others.

DOJ's actions in Lucasfilm act as a reminder to employers to be mindful of potential antitrust concerns in their hiring practices. Agreements with competitors to restrain the solicitation and hiring of employees, unless reasonably necessary for pro-competitive collaborations or other acceptable purposes, will be viewed as per se unlawful under the antitrust laws. DOJ has made it clear that it is closely watching, especially in this economic environment, to ensure that the "market forces are with you."