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THOMAS P. BROWN (SB# 182916) tombrown@paulhastings.com

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SAMUEL C. ZUN (SB# 264930) samuelzun@paulhastings.com

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EMILY DODDS POWELL (SB# 274488) emilypowell@paulhastings.com

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PAUL HASTINGS LLP 55 Second Street

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Twenty-Fourth Floor San Francisco, CA 94105-3441

 

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Telephone: 1(415) 856-7000 Facsimile: 1(415) 856-7100

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Attorneys for Defendant

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eBay Inc.

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UNITED STATES DISTRICT COURT

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NORTHERN DISTRICT OF CALIFORNIA

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SAN JOSE DIVISION

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UNITED STATES OF AMERICA,

CASE NO. CV12-5869-EJD-PSG

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Plaintiff,

DEFENDANT’S NOTICE OF MOTION, MOTION TO DISMISS THE COMPLAINT PURSUANT TO FRCP 12(B)(6), AND MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT THEREOF

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v.

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EBAY INC.,

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Defendant.

 

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Date:

April 26, 2013 9:00 a.m.

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Time:

Courtroom: Courtroom 4, 5th Floor

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Judge:

Edward J. Davila

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TABLE OF CONTENTS

 

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I. STATEMENT OF ISSUES TO BE DECIDED

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II. INTRODUCTION

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III. FACTUAL BACKGROUND

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IV. LEGAL STANDARD

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V. THE COMPLAINT FAILS TO STATE A CLAIM UPON WHICH RELIEF CAN BE GRANTED

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A. The Complaint Fails To State A Claim Because A Section One Conspiracy

Cannot Arise Where The Participants Share A Unity Of Purpose

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1. A Section One Conspiracy Cannot Arise Among Alleged

Conspirators That, Like eBay’s Officers and Directors, Share A Unity Of Purpose

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2. The Complaint Challenges An Alleged Decision Made By A Group

Of People Who By Virtue Of Their Roles As Officers And Directors Of eBay Had A Unity Of Purpose

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3. The Complaint Threatens To Create A Conflict Between Section One Of The Sherman Act And Section Eight Of The Clayton Act,

The Antitrust Statute That Governs Shared Directors And Senior Officers

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B. The Complaint Does Not Allege Facts That, Even If Assumed True, Would

Support A Conclusion That The Challenged Conduct Harmed Competition

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1. The DOJ Cannot Avoid Its Obligation To Establish That The

Alleged Agreement Unreasonably Restrained Trade Simply By Labeling It Per Se Unlawful

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2. No Court Has Found An Antitrust Violation Based On An

Agreement Regarding Hiring Practices Without Considering Facts Regarding Market Power And The Effect Of The Alleged Restraint On the Market

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3. A “Quick Look” Analysis Is Inappropriate In This Case

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4. The DOJ’s Remedies in Related Consent Decrees Demonstrate The

Inconsistencies Created By Presuming Illegality Simply From The Existence Of An Agreement Between Firms Regarding Hiring Practices

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VI. CONCLUSION

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TABLE OF AUTHORITIES

 

Page(s)

CASES

Adaptive Power Solutions, LLC v. Hughes Missile Sys. Co.,

 

141

F.3d 947 (9th Cir. 1998)

14

Anderson v. Shipowners Association of the Pacific,

272

U.S. 359 (1926)

20

Aronson v. Lewis,

473

A.2d 805 (Del. 1984)

9

Ashcroft v. Iqbal,

556

U.S. 662 (2009)

5, 19

Aydin Corp. v. Loral Corp.,

718

F.2d 897 (9th Cir. 1983)

19, 20

Bell Atl. Bus. Sys. Servs. v. Hitachi Data Sys. Corp.,

849

F. Supp. 702 (N.D. Cal. 1994)

8

Bell Atl. Corp. v. Twombly,

550

U.S. 544 (2007)

5, 6

Board of Trade of the City of Chicago v. United States,

246

U.S. 231 (1918)

14

Bogan v. Hodgkins,

166

F.3d 509 (2d Cir. 1999)

17, 18

Broadcast Music, Inc. v. Columbia Broadcasting System, Inc. (“BMI”),

441

U.S. 1 (1979)

16, 24

Cal. Dental Ass’n v. FTC,

526

U.S. 756 (1999)

21

Century Oil Tool v. Prod. Specialties,

737

F.2d 1316 (5th Cir. 1984)

8

Cesnik v. Chrysler Corp.,

490

F. Supp. 859 (M.D. Tenn. 1980)

24

Coleman v. Gen. Elec. Co.,

643

F. Supp. 1229 (E.D. Tenn. 1986)

24

Continental T.V., Inc. v. GTE Sylvania Inc.,

433

U.S. 36 (1977)

15, 16

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TABLE OF AUTHORITIES (continued)

 

Page(s)

Cooper v. Pickett,

137

F.3d 616 (9th Cir. 1997)

4

Copperweld Corp. v. Independence Tube Corp.,

467

U.S. 752 (1984)

1, 6, 7, 8, 9

Directory Sales Mgmt. Corp. v. Ohio Bell Tel. Co.,

833

F.2d 606 (6th Cir. 1987)

8

Eichorn v. AT&T Corp.,

248

F.3d 131 (3d Cir. 2007)

19, 24

FTC v. Ind. Fed’n of Dentists,

476

U.S. 447 (1986)

21

In re High-Tech Employee Antitrust Litig.,

856

F. Supp. 2d 1103 (2012)

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Kendall v. Visa U.S.A., Inc.,

518

F.3d 1042 (9th Cir. 2008)

14

Krzalic v. Republic Title Co.,

314

F.3d 875 (7th Cir. 2002)

13

Leegin Creative Leather Prods., Inc. v. PSKS, Inc.,

551

U.S. 877 (2007)

15, 16

Moss v. U.S. Secret Serv.,

572

F.3d 962 (9th Cir. 2009)

6

N. Pac. Ry. Co. v. United States,

356

U.S. 1 (1958)

16

Nat’l Collegiate Athletic Ass’n v. Bd. Of Regents of Univ. of Okla.

(“NCAA”), 468 U.S. 85 (1984)

9, 17, 21

Nat’l Soc’y of Prof’l Eng’rs v. United States,

435

U.S. 679 (1978)

21

Nichols v. Spencer International Press, Inc.,

371

F.2d 332 (7th Cir. 1967)

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Polygram Holding, Inc. v. FTC,

416

F.3d 29 (D.C. Cir. 2005)

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TABLE OF AUTHORITIES (continued)

 

Page(s)

Pool Water Prods. v. Olin Corp.,

258

F.3d 1024 (9th Cir. 2001)

17

Quinonez v. National Association of Securities Dealers, Inc.,

540

F.2d 824 (5th Cir. 1976)

19

Rebel Oil, Inc. v. Atl. Richfield Co.,

51

F.3d 1421 (9th Cir. 1995)

10

Siegel Transfer v. Carrier Express,

54

F.3d 1125 (3d Cir. 1995)

8

State Oil Co. v. Khan,

522

U.S. 3 (1997)

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Texaco Inc. v. Dagher,

547

U.S. 1 (2006)

14

Union Circulation Co. v. FTC,

241

F.2d 652 (2d Cir. 1957)

18

United States v. Brown,

936

F.2d 1042 (9th Cir. 1991)

20

United States v. Cooperative Theatres of Ohio, Inc.,

845

F.2d 1367 (6th Cir. 1988)

20

United States v. Lucasfilm Ltd., No. 1:10-cv-02220 (D.D.C. June 3, 2011)

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STATUTES

15 U.S.C.

§ 1

7

§ 19(a)(1)–(2)

11, 12

§ 19(a)(1)(B)

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Del. Code Ann. Tit. 8 § 141(a)

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TABLE OF AUTHORITIES (continued)

 

Page(s)

OTHER AUTHORITIES

 

ABA SECTION OF ANTITRUST LAW, ANTITRUST LAW DEVELOPMENTS (7th ed. 2012)

12, 16

Benjamin M. Gerber, Enabling Interlock Benefits While Preventing Anticompetitive

Harm: Toward An Optimal Definition of Competitors Under Section 8 Of The Clayton Act, 24 YALE J. ON REG. 107 (2007)

12

Brian R. Henry & Joseph M. Miller, “Sorry, We Can’t Hire You

We Promised Not

To”: The Antitrust Implications of Entering Into No-Hire Agreements, 11 ANTITRUST

39

(Fall 1996)

23

Brief for the United States as Amicus Curiae Supporting Petitioner, Am. Needle, Inc. v. Nat’l Football League,

No. 08-661, 2009 WL 3070863 (Sept. 25, 2009)

14, 24

H.R. Rep. 101-483 (1990)

 

13

David K. Haase and Darren M. Mungerson, Agreements Between Employers Not to Hire Each Other’s Employees: When Are They Enforceable?, 21 LAB. LAW. 277 (2006)

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Mark S. Mizruchi, What Do Interlocks Do? An Analysis, Critique, and Assessment of Research on Interlocking Directorates, 22 ANN. REV. SOC. 271 (1996)

12

Michael Boudin, Acting Assistant Attorney General, Antitrust Div., U.S. Dep’t. of Justice,

Statement before the House Committee on the Judiciary (June 15, 1989)

13

Thomas G. Krattenmaker, Situating Realcomp in the Sweep of Antitrust Law and Policy,

11

U.C. DAVIS BUS. L.J. 361 (2011)

10

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NOTICE OF MOTION AND MOTION TO DISMISS

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TO PLAINTIFF AND ITS ATTORNEYS OF RECORD:

 

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PLEASE TAKE NOTICE that on April 26, 2013, at 9:00 a.m., or as soon thereafter as this

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matter may be heard in Courtroom 4, 5th Floor, of the United States District Court, Northern

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District of California, located at 280 South 1st Street, San Jose, California, the Honorable Edward

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J. Davila presiding, Defendant eBay Inc. will and hereby does move this Court for an order

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dismissing the Complaint without leave to amend pursuant to Federal Rule of Civil Procedure

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12(b)(6), for failure to state a claim upon which relief can be granted.

 

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This motion is based on this Notice of Motion and Motion, the accompanying

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Memorandum of Points and Authorities in support thereof, the Declaration of Thomas P. Brown

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in support thereof, any Reply Memorandum, the pleadings and files in this action, and such

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arguments and authorities as may be presented at or before the hearing.

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MEMORANDUM OF POINTS AND AUTHORITIES

I. STATEMENT OF ISSUES TO BE DECIDED

Defendant eBay Inc. (“eBay”) moves to dismiss the Complaint pursuant to Federal Rule

of Civil Procedure 12(b)(6) on the following grounds:

1. The Complaint fails to state a claim upon which relief may be granted under the

Sherman Act because it fails to allege an actionable conspiracy.

2. The Complaint fails to state a claim upon which relief may be granted under the

Sherman Act because it fails to allege harm to competition.

II. INTRODUCTION

Section One of the Sherman Act does not exist to micromanage the interaction between

the officers and directors of a public company. It exists to protect consumers from concerted

action among true rivals that suppresses demand without offering any offsetting benefits. By this

standard, even assuming the truth of the allegations in the Complaint, eBay did nothing wrong,

and the Complaint should be dismissed for failure to state a claim.

The Complaint does not allege a conspiracy actionable under Section One. All of the

people mentioned by name in the Complaint served as officers and/or Directors of eBay. Under

the Supreme Court’s decision in Copperweld Corp. v. Independence Tube Corp., 467 U.S. 752

(1984), as a matter of law the people named in the Complaint are incapable of conspiring with

one another. For purposes of setting eBay policy on recruiting and hiring, their collective

decision is eBay’s decision.

Moreover, the effort to force this case into a Section One paradigm creates an unnecessary

conflict with Section Eight of the Clayton Act. Section Eight embodies an express Congressional

judgment that people can serve on the boards of two companies so long as those companies are

not close competitors. The Complaint seeks to overturn this Congressional judgment. It turns an

individual, Mr. Scott Cook, who was lawfully serving on the board of two companies, eBay Inc.

and Intuit Inc., into the conduit for the creation of a conspiracy between those companies. The

Department of Justice’s (“DOJ”) action, if successful, would render Section Eight a dead letter

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and make it difficult for companies to find people of sufficient talent, experience and integrity to

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staff their boards.

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Even assuming that the challenged actions fall within the scope of Section One, the action

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still fails as a matter of law. The Complaint does not identify even a single person who was

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harmed by eBay’s alleged actions, and concedes that eBay’s conduct may not have affected

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anyone. Although this concession necessarily means that eBay’s conduct could not have affected

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competition in any cognizable antitrust market as a whole, the Complaint asserts that such an

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effect should be presumed through application of the per se rule or “quick look” doctrine. This,

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too, is wrong.

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The per se rule and “quick look” doctrine represent narrow exceptions to the general rule

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that every plaintiff in a Section One case must prove that the challenged conduct actually harmed

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competition in a relevant market. The per se rule and “quick look” doctrine only apply where

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unambiguous judicial experience demonstrates that the particular conduct at issue has no effect,

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other than to stifle competition, or where such an effect is obvious to anyone “with a rudimentary

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understanding of economics.” These exceptions have no place in this case. No prior case

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evaluating similar conduct has ever deemed such conduct per se unlawful or concluded that its

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effects were so obviously anticompetitive that it should be condemned based on a “quick look.”

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And the Complaint fails to explain how the challenged conduct could possibly have affected

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market-wide outcomes.

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The most compelling argument against the application of the per se rule or “quick look”

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doctrine comes from the DOJ itself. The DOJ, as the Complaint states, has filed prior cases

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challenging similar conduct. In resolving those cases, the DOJ has explicitly recognized that the

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precise conduct alleged here—an agreement not to recruit or hire employees of another

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company—can be justified. Indeed, the DOJ’s consent decrees with other defendants approve of

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conduct restricting the hiring and recruiting of employees in a long and varied list of

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circumstances. Such an outcome cannot be squared with the argument that such agreements,

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without fail, harm competition. By definition, a per se violation can have no exceptions.

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This Complaint does not state a claim on which relief can be granted. Every plaintiff

seeking to prove a violation of Section One must allege that the defendant engaged in (1)

concerted action that (2) harmed consumer welfare. This Complaint does not offer facts that

plausibly support either conclusion. It should, therefore, be dismissed.

III. FACTUAL BACKGROUND 1

In November 2005, eBay’s then-COO, Maynard Webb, approached Mr. Scott Cook, a

long-standing member of eBay’s Board of Directors, to discuss some potential hires from Intuit, a

company that Mr. Cook had founded and for whom he served as Chairman of its Executive

Committee. (Id. ¶¶ 12, 15.) Mr. Webb explained to Mr. Cook that eBay planned to hire an Intuit

employee and proposed a going-forward policy in which eBay would give Intuit notice in the

event that eBay intended to recruit more senior level people. (Id.)

The Complaint alleges that Mr. Cook objected to the proposed policy “insofar as it

allowed hiring of any employees without prior notice to Intuit.” (Id.) According to the

Complaint, Mr. Cook told eBay’s COO via email that companies with a shared director “don’t

recruit from other board companies, period.” (Id.) He added that “we’re passionate on this.”

(Id.) Mr. Cook made his point to Mr. Webb with an example drawn from his board service for

another company, alluding to the duties that someone with a role as a director or officer of two

companies owes both companies and the challenge of managing those duties given the

confidential information that a Board member is exposed to about many things, including critical

employees. (Id.)

The Complaint alleges that notwithstanding this discussion, eBay hired the two Intuit

employees in December 2005. (Compl. ¶ 16.) These hires prompted a discussion between

eBay’s then-CEO, Meg Whitman, and Mr. Cook, about hiring from “board companies.” (Id.)

According to the Complaint, Ms. Whitman communicated to eBay’s head of human resources

that eBay’s decision to hire two executives from Intuit had left eBay’s Director, Mr. Cook,

“slightly miffed.” (Id.)

1 Solely for the purposes of this Motion to Dismiss, eBay assumes the truth of the facts alleged in

the Complaint.

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The Complaint alleges that sometime after this discussion eBay changed its policy

regarding recruiting Intuit employees. The Complaint claims that in August 2006, eBay’s head of

human resources observed that eBay had decided to provide Mr. Cook with advance notice before

recruiting Intuit employees. (Id. ¶ 17.) This observation occurred in response to a potential

recruit from Intuit. (Id.) According to the Complaint, eBay’s head of human resources confirmed

with Ms. Whitman that eBay had implemented a policy of “notifying Scott first.” (Id.) The

Complaint alleges that eBay did not reach out to the potential candidate. (Id.)

The Complaint alleges that eBay continued to hire from Intuit after this change in policy.

In about April of 2007, according to the Complaint, eBay hired into its internal communications

department an employee from Intuit. (Id. ¶¶ 18–19.) The Complaint alleges that eBay had not

recruited this particular candidate. (Id. ¶ 18.) Instead, the candidate had applied unsolicited.

(Id.) The Complaint claims that this hire made Mr. Cook “quite unhappy.” (Id.) The Complaint

alleges that following this hire, and beginning in April 2007, eBay changed its policy to not hire

any employees from Intuit. (Id.)

The Complaint does not allege that Intuit refrained from hiring eBay employees. Rather,

it claims that Mr. Cook told an applicant that had taken a job at eBay that “Intuit is precluded

from recruiting you.” (Id. ¶ 21.) The Complaint also alleges that Ms. Whitman sent Mr. Cook a

recruiting flyer, forwarded to her by eBay’s head of human relations, that Intuit had apparently

sent to an eBay employee. (Id. ¶ 22.)

The Complaint identifies “Intuit and senior executives at Intuit and eBay” as co-

conspirators. (Id. ¶ 9.) It does not, however, name Intuit as a Defendant. Instead, the Complaint

alleges that any violation committed by Intuit was cured by Intuit’s entry into an earlier consent

decree arising from a complaint that alleged an agreement involving a company other than eBay.

(Id.; see also Brown Decl., Ex. A (the “Consent Decree”). 2 ) Although the Consent Decree

nominally bars “any agreement” that “in any way” restrains “soliciting, cold calling, recruiting, or

2 Because the DOJ referred to the Consent Decree in its Complaint, it is appropriate to attach the

Consent Decree to the motion for the Court’s consideration. See Cooper v. Pickett, 137 F.3d 616, 622 (9th Cir. 1997) (“a document is not ‘outside’ the complaint if the complaint specifically

refers to the document and if its authenticity is not questioned”).

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otherwise competing for employees,” it also contains broad exceptions to this blanket

prohibition. (Consent Decree at 5.) More specifically, the Consent Decree allows Intuit and the

other signatories to continue to “attempt[] to enter into, enter[] into, maintain[] or enforc[e] a no

direct solicitation provision,” including with their own employees in employment or severance

agreements. (Id. at 5–6.) The Consent Decree also leaves the signatories, including Intuit, free to

“unilaterally decid[e] to adopt a policy not to consider applications from employees of another

person, or to solicit, cold call, recruit or hire employees of another person.” (Id. at 7.)

The Complaint does not allege facts to support a conclusion that eBay’s conduct harmed

any individual or the market as a whole. It does not allege that eBay stopped hiring generally or

reduced wages and benefits for people that it did hire. It does not identify any Intuit employee

who would have received a better job at eBay, or vice versa, absent eBay’s alleged decision to not

recruit or hire from Intuit. Nor does it quantify the “better compensation, benefits, and working

conditions” that employees allegedly would have had the “ability to secure” but for eBay’s

alleged conduct. (Compl. ¶ 27.) While the Complaint speculates that eBay’s alleged conduct

“might” have had an impact on some individual employees who “remained in jobs that did not

fully utilize their unique skills” (id. ¶ 11), it fails to allege any facts that would support an

inference that the elimination of rivalry between eBay and Intuit would have any impact

whatsoever on any relevant market for talent.

Indeed, the Complaint does not allege that any of the people identified in the Complaint

were trying to impact the market. The Complaint does not allege Ms. Whitman, Mr. Webb, Mr.

Cook or anyone else intended to eliminate competition between Intuit and eBay in order to reduce

wages, increase prices, or otherwise affect price or output in any relevant market.

IV. LEGAL STANDARD

To survive a motion to dismiss, a complaint must plead “enough facts to state a claim to

relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). A

formulaic recitation of the elements of the claims will not suffice, and the Court cannot assume

the truth of conclusory allegations unsupported by facts.

(2009). Further, the complaint’s “non-conclusory ‘factual content,’ and reasonable inferences

Ashcroft v. Iqbal, 556 U.S. 662, 679

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from that content, must be plausibly suggestive of a claim entitling the plaintiff to relief.” Moss

v. U.S. Secret Serv., 572 F.3d 962, 969 (9th Cir. 2009). That is, the “[f]actual allegations must be

enough to raise a right to relief above the speculative level.” Twombly, 550 U.S. at 555.

V. THE COMPLAINT FAILS TO STATE A CLAIM UPON WHICH RELIEF CAN BE GRANTED.

The Complaint fails to allege facts that support either of the conclusions necessary to

sustain a case under Section One of the Sherman Act. First, it does not identify a conspiracy

actionable under Section One because it focuses exclusively on the interaction of a group of

people who served as officers and Directors of eBay Inc. By virtue of their shared connection to

eBay, the individuals identified in the Complaint had a unity of economic interest that, as a matter

of law, precludes a claim that they engaged in concerted action that triggers Section One scrutiny.

The Complaint’s attempt to use Section One to micromanage the interaction of the officers and

Directors of eBay also creates an unnecessary conflict between Section One and Section Eight of

the Clayton Act. Second, the Complaint makes no effort to identify the effect on competition (if

any) from eBay’s alleged conduct. Instead, it invokes the per se rule and quick look doctrine

even though courts and the DOJ have historically and consistently subjected practices related to

hiring and recruiting to rule of reason review. For both reasons, the Complaint should be

dismissed. 3

A. The Complaint Fails To State A Claim Because A Section One Conspiracy Cannot Arise Where The Participants Share A Unity Of Purpose.

The Complaint does not allege an actionable conspiracy. Its allegations focus on the

interaction between the senior officers and the director of a single firm. But to be actionable

under the Sherman Act, a conspiracy must involve “independent centers of decisionmaking.”

Copperweld, 467 U.S. at 769. Because this Complaint concerns only the interaction of people

3 Separately, the Complaint does not explain how the “recruitment and hiring activities at issue in

this Complaint

as is required for the Court to have subject matter jurisdiction. For example, the Complaint contains no allegations regarding whether the alleged agreement affected even a single Intuit

employee seeking employment at an eBay location in a different state, or vice-versa.

are in the flow of and substantially affect interstate commerce,” (Compl. ¶ 5),

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affiliated with a single entity, it fails as a matter of law. Moreover, by invoking Section One of

the Sherman Act to police an eBay policy that allegedly arose in response to concerns expressed

by a director that eBay shared with another firm, the Complaint threatens to create an unnecessary

and counterproductive conflict between Section One of the Sherman Act and Section Eight of the

Clayton Act, the antitrust statute that polices the competitive issues that arise from interlocking,

or shared, directors and senior officers.

1. A Section One Conspiracy Cannot Arise Among Alleged Conspirators That, Like eBay’s Officers and Directors, Share A Unity Of Purpose.

The Sherman Act draws a fundamental distinction between concerted action and unilateral

action. The Sherman Act gives individual firms a wide berth. It allows them to pursue their own

self-interest even if their actions leave consumers, suppliers and competitors worse off.

Implicitly, the text of the Sherman Act reflects a judgment that absent the threat of monopoly, the

market serves as an effective check on the actions of individual firms. The Sherman Act is more

suspicious of concerted action. When firms “contract, combin[e]

obliges them to behave reasonably. 15 U.S.C. § 1. The theory, best articulated by the Supreme

Court’s decision in Copperweld, is that concerted action “deprives the marketplace of the

independent centers of decisionmaking that competition assumes and demands.” Copperweld,

467 U.S. at 769.

or conspir[e],” the Act

But this distinction is meaningful only to the extent that courts coherently segregate

concerted action from unilateral action. The Supreme Court confronted this question in

Copperweld. That case originated in a dispute between three companies in the business of

manufacturing steel tubing: Independence Tube, Regal Tube, and Copperweld. Id. at 755–57.

Independence Tube claimed that Copperweld and its subsidiary, Regal Tube, had violated Section

One by conspiring with one another to prevent customers and suppliers from doing business with

Independence Tube. Id. at 757–58. A jury agreed, and the Seventh Circuit affirmed. Id. The

Supreme Court reversed, holding that a parent corporation and its wholly owned subsidiary are

incapable of conspiring with one another. Id. at 777.

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Copperweld holds that courts should not find antitrust conspiracies in contexts where the

alleged participants necessarily have a shared purpose even absent an agreement. Harking back

to American Tobacco, Copperweld observes that an antitrust conspiracy requires “a unity of

purpose or a common design and understanding, or a meeting of minds in an unlawful

arrangement.” Id. at 771 (quoting American Tobacco Co. v. United States, 328 U.S. 781, 810

(1946)). It explains that no such agreement can be reached in the context of a relationship

between a parent and a subsidiary because these entities always have a “unity of purpose or a

common design.” Id. It likewise admonishes courts not to construe Section One to reach actions

that involve “the coordination of two employees,” noting that “[s]uch a rule would obliterate the

Act’s distinction between unilateral and concerted conduct.” Id. at 776.

Courts have expanded on Copperweld’s examination of parent-subsidiary coordination to

hold that related corporate entities are also incapable of conspiring for Section One purposes.

See, e.g., Directory Sales Mgmt. Corp. v. Ohio Bell Tel. Co., 833 F.2d 606, 611 (6th Cir. 1987)

(two wholly-owned subsidiaries of the same parent corporation); Century Oil Tool v. Prod.

Specialties, 737 F.2d 1316, 1317 (5th Cir. 1984) (two corporations with common ownership);

Bell Atl. Bus. Sys. Servs. v. Hitachi Data Sys. Corp., 849 F. Supp. 702, 705–07 (N.D. Cal. 1994)

(a parent and its partially-owned subsidiary, over which it had legal control). Numerous courts

have also reaffirmed the principle stated in Copperweld, that “section 1 does not capture

coordinated activity among the employees and officers of the same firm or police ‘internal

agreements’ between a corporation and these individuals.” Siegel Transfer v. Carrier Express, 54

F.3d 1125, 1134 (3d Cir. 1995) (citing Copperweld, 467 U.S. at 769).

2. The Complaint Challenges An Alleged Decision Made By A Group Of People Who By Virtue Of Their Roles As Officers And Directors Of

eBay Had A Unity Of Purpose.

The Complaint seeks to conjure a Section One conspiracy from the interactions of eBay’s

senior management with a member of eBay’s Board of Directors. It imputes to Mr. Cook the

interests of one of the other companies for which he also served as a director. But the mere fact

that Mr. Cook has interests outside of his role as an eBay Director does not support a Section One

claim in the wake of Copperweld and its progeny. This Complaint does not allege facts that

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1

support a conclusion that eBay’s policy with regard to recruiting or hiring people employed by

2

Intuit constituted an actionable conspiracy. Nor does it allege facts linking eBay’s policy to

3

competitive harm—regardless of whether the policy is attributed to an agreement or unilateral

4

action.

5

The interests of eBay’s executives and Board members, in particular those named in the

6

Complaint, cannot be separated from eBay. In their respective roles, they have obligations to one

7

another and to the other constituents with an interest in the decisions that eBay makes (e.g., its

8

shareholders). Under Delaware law, “[t]he business and affairs of every [Delaware] corporation .

9

shall be managed by or under the direction of a board of directors

.” Del. Code Ann. tit. 8 §

10

141(a). This managerial power “carries with it certain fundamental fiduciary obligations to the

11

corporation and its shareholders.” Aronson v. Lewis, 473 A.2d 805, 811 (Del. 1984), overruled

12

on other grounds by Brehm v. Eisner, 756 A.2d 244 (Del. 2000). But so long as eBay’s Directors

13

and officers operate within the broad parameters set by the business judgment rule, their decisions

14

are eBay’s decisions. See id. at 812 (noting that the business judgment rule “is a presumption that

15

in making a business decision the directors of a corporation acted on an informed basis, in good

16

faith and in the honest belief that the action taken was in the best interests of the company”). As

17

with the parent and wholly-owned subsidiary in Copperweld, the officers and directors of a

18

company “always have a ‘unity of purpose or a common design.’” Copperweld, 467 U.S. at 771

19

(quoting American Tobacco, 328 U.S. at 810). And as with a parent and a wholly-owned

20

subsidiary, “the very notion of an ‘agreement’ in Sherman Act terms between [a company’s

21

executives and its directors] lacks meaning.” Copperweld, 467 U.S. at 771. They are the

22

company.

23

The Complaint also fails to allege facts linking the alleged policy to the competitive

24

concerns that animate Section One. At this point in the long evolution of U.S. antitrust law, it is

25

universally accepted that preventing diminution in consumer welfare is the “fundamental goal of

26

antitrust law.” Nat’l Collegiate Athletic Ass’n v. Bd. Of Regents of Univ. of Okla. (“NCAA”), 468

27

U.S. 85, 107 (1984).

The phrase “consumer welfare,” as used in the antitrust context, has a very

28

specific, technical meaning tied to the allocation of goods through the price mechanism. See id.

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(tying “consumer welfare” to “the importance of consumer preference in setting price and

output”). 4 See also Rebel Oil, Inc. v. Atl. Richfield Co., 51 F.3d 1421, 1444 n.15 (9th Cir. 1995)

(“As we have noted previously, allocative efficiency is synonymous with consumer welfare, and

Section One of the

Sherman Act advances the antitrust cause by prohibiting agreements that harm consumer

welfare—i.e., suppress market output below the levels that would prevail in the absence of the

agreement.

is the central goal of the Sherman Act.” (internal citations omitted)).

The Complaint does not allege that Ms. Whitman, Mr. Cook or anyone else associated

with eBay’s alleged policy advocated for it out of a desire to suppress wages or benefits for

anyone. The Complaint does not identify a single email that even referred to wages or benefits.

Even with the benefit of hindsight (and a three year investigation), the Complaint equivocates on

whether eBay’s policy had such an impact. The first paragraph claims only that the challenged

conduct “might” have lowered salaries and benefits for people who worked at Intuit, necessarily

conceding that such people also might not have commanded higher salaries or benefits. (Compl.

¶ 1 (emphasis added).) Later, the Complaint claims that the challenged conduct “likely resulted

in some of eBay’s and Intuit’s employees remaining in jobs that did not fully utilize their unique

skills,” without alleging a single fact to support such a conclusion. (Id. ¶ 11 (emphasis added).)

Absent allegations linking the policy to a desire to suppress wages or benefits, the

Complaint fails to allege facts that suggest the policy should be treated as anything other than

what it, on its face, appears to be—a reasonable accommodation to an eBay Director concerned

about the appearance of divided loyalties. Indeed, the Complaint concedes that the policy was

motivated by concerns that cross-hiring among companies that share a director could create the

appearance of a conflict of interest. The Complaint attempts to cast this motivation in a dark

light, alleging that Mr. Cook “was willing to sacrifice the welfare of Intuit’s employees in order

to advance his own personal interests in serving on eBay’s Board.” (Id. ¶ 12.) But this allegation

4 See also Thomas G. Krattenmaker, Situating Realcomp in the Sweep of Antitrust Law and

Policy, 11 U.C. DAVIS BUS. L.J. 361, 364 (2011) (“We say that consumer welfare is harmed when market output is reduced below otherwise prevailing competitive levels, so that market prices rise

above competitive levels.”).

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directly undermines the premise of the Complaint. It concedes that Mr. Cook’s interests in

eBay’s hiring related to his position on eBay’s Board and had nothing whatsoever to do with

suppressing wages or benefits for Intuit employees.

3. The Complaint Threatens To Create A Conflict Between Section One Of The Sherman Act And Section Eight Of The Clayton Act, The

Antitrust Statute That Governs Shared Directors And Senior Officers.

To the extent that the claim is that Mr. Cook’s interests can be separated from eBay’s by

virtue of the roles he plays for other companies, the Complaint offers no explanation as to why

those concerns are not better addressed by the antitrust statute that was specifically crafted to

handle them, Section Eight of the Clayton Act. Every director, officer and employee has interests

independent of the roles they play for a particular company. Antitrust law polices the competitive

issues that flow from such interests through a clear set of rules set down by Congress in Section

Eight of the Clayton Act. Section Eight permits individuals to serve on the boards of multiple

companies so long as those companies are not meaningful competitors. Directors rely on those

rules to know when they can serve on the boards of multiple companies. This Complaint seeks to

override Congress’s express judgment by creating a Section One conspiracy through the actions

taken by someone lawfully serving on multiple boards of directors.

Section Eight establishes clear rules for evaluating potential competitive impacts where

firms share senior officers or directors—sometimes known as interlocking directors or interlocks.

The literal language of Section Eight prohibits interlocks if the interlocked companies are capable

of jointly violating the antitrust laws: “No person shall, at the same time, serve as a director or

officer in any two corporations

operation, competitors, so that the elimination of competition by agreement between them would

constitute a violation of the antitrust laws

out exemptions that permit interlocks where the companies are below a certain size or where their

competitive sales fall below a certain threshold. See id. § 19(a)(1)–(2). 5 In doing so, Section

that are

by virtue of their business and location of

.” 15 U.S.C. § 19(a)(1)(B). The statute then carves

5 Section Eight permits interlocks between companies if (1) one of the companies has less than $10 million in aggregated capital, surplus, and undivided profits; (2) the competitive sales of

either corporation are less than $1 million; (3) the competitive sales of either corporation is less

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Eight “removes from the coverage of interlock prohibitions arrangements that pose little risk of

significant antitrust injury.” ABA SECTION OF ANTITRUST LAW, ANTITRUST LAW

DEVELOPMENTS, at 438 (7th ed. 2012) (citing the legislative history of Section Eight). Section

Eight, thus, reflects Congress’s judgment that interlocks between otherwise independent

companies are competitively benign so long as the companies, or their competitive overlap, are

small. 6

Section Eight reflects a Congressional decision that the competitive benefits of an

interlock outweigh the costs of the coordination that inevitably follows so long as the companies

or their competitive overlap fall within the statutory safe-harbors. It implicitly recognizes that

few people possess the talent, experience and personal integrity necessary to manage large

shareholder-owned companies. People who serve as officers or directors of other companies are

inherently attractive because adding such people to a board “signals to potential investors that [a

company] is a legitimate enterprise worthy of support.” Mark S. Mizruchi, What Do Interlocks

Do? An Analysis, Critique, and Assessment of Research on Interlocking Directorates, 22 ANN.

REV. SOC. 271, 276 (1996). Moreover, adding people to a board who serve in a senior capacity

for another company allows for the transfer of general management information and expertise,

which ultimately benefits consumers and society as a whole. See Benjamin M. Gerber, Enabling

Interlock Benefits While Preventing Anticompetitive Harm: Toward An Optimal Definition of

Competitors Under Section 8 Of The Clayton Act, 24 YALE J. ON REG. 107, 115–16 (2007).

The Complaint’s effort to invoke Section One to police eBay’s response to concerns

expressed by a Director it shared with Intuit creates an unnecessary and, ultimately,

counterproductive conflict between these two provisions. All productive enterprises compete for

employees, and cross-hiring across companies that share directors has the potential to create real

issues for those directors. For example, if a shared director were aware of a unique problem

associated with a particular cross-hire, would that director be obligated to tell the hiring company

than 2% of that corporation’s total sales; or (4) the competitive sales of each corporation are less

than 4% of that corporation’s total sales. 15 U.S.C. § 19(a)(1)(2). 6 The Complaint does not allege that competitive sales by eBay and Intuit exceed these

thresholds.

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of that problem? Would that obligation give way if revealing the information to the hiring

company would harm the company from which that person was being hired? As a result, all

companies can be expected to devise policies around whether to hire from companies affiliated

with their directors, to communicate with their directors about such policies, and to modify those

policies based on feedback from their directors. To the extent that such exchanges become the

basis for a Section One claim, the mere existence of an interlocked director would become the

basis for an action. 7 This would effectively render the safe-harbors of Section Eight a dead letter,

making it more difficult for firms to attract qualified directors and undermining the objective that

Congress sought to achieve when it added those safe-harbors to the statute. 8

B. The Complaint Does Not Allege Facts That, Even If Assumed True, Would Support A Conclusion That The Challenged Conduct Harmed Competition.

Even if there were some basis for invoking Section One to challenge the interaction

between Mr. Cook, Ms. Whitman and other senior eBay executives, the Complaint should still be

dismissed. As noted above, the Complaint fails to allege any facts that support a conclusion that

the alleged conspiracy actually affected market outcomes. This hole in the Complaint’s

allegations is fatal to the claim, and the Complaint’s effort to invoke the per se rule and “quick

look” doctrine should be rejected. 9

7 The theory of this Complaint could be extended to a host of actions that arise on the supply side of firms. Negotiations to obtain real estate, telecommunications, advertising services, payment

card processing and even office supplies could give rise to claims of “coordination” essentially identical to those at issue here.

8 Congress amended Section Eight in 1990 in reaction to calls by some, including the DOJ, for an amendment that would add explicit safe-harbors to the statute. See Michael Boudin, Acting Assistant Attorney General, Antitrust Div., U.S. Dep’t. of Justice, Statement before the House Committee on the Judiciary, at 23 (June 15, 1989) (urging Congress to add “[e]xplicit, numerical safe harbors” to Section Eight). As the House Report recommending passage of the amendments explained, “[a] ban on interlocking directorates serves no functional purpose where the corporations are not in competition with one another to a significant degree or where they compete in a line of business that is not economically significant in relation to their

overall operations.” H.R. Rep. 101-483, at 7 (1990).

9 The DOJ’s interpretation of the law is not entitled to deference in a civil or criminal case. See

Krzalic v. Republic Title Co., 314 F.3d 875, 883 (7th Cir. 2002) (Easterbrook, J., concurring) (“Judges do not apply Chevron to the Attorney General’s interpretation of the Sherman Antitrust

Act, whether in public or in private litigation.”).

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The “presumptive or default standard” for determining whether a particular practice

imposes an unreasonable restraint is the “rule of reason” that Justice Brandeis first enunciated in

Board of Trade of the City of Chicago v. United States, 246 U.S. 231 (1918). See Texaco Inc. v.

Dagher, 547 U.S. 1, 5 (2006) (“this Court presumptively applies rule of reason analysis”). As the

DOJ itself explained in a recent amicus curiae brief, the rule of reason evaluates the

reasonableness of an alleged restraint by considering “as appropriate, ‘specific information about

the relevant business,’ ‘the restraint’s history, nature, and effect,’ and the participants’ market

power.” Brief for the United States as Amicus Curiae Supporting Petitioner at 11–12, Am.

Needle, Inc. v. Nat’l Football League, No. 08-661, 2009 WL 3070863, at *12 (Sept. 25, 2009)

(quoting Leegin Creative Leather Prods., Inc. v. PSKS, Inc., 551 U.S. 877, 885–86 (2007)

(internal citations omitted)). 10

In determining whether a practice is unreasonable, “the focus is on actual effects that the

challenged restraint has had on competition in a relevant market.” Adaptive Power Solutions,

LLC v. Hughes Missile Sys. Co., 141 F.3d 947, 950–51 (9th Cir. 1998) (quoting Bhan v. NME

Hosps., Inc., 929 F.2d 1404, 1410 (9th Cir. 1991)). Thus, to state a Section One claim under the

rule of reason, a plaintiff must plead three elements: “(1) a contract, combination or conspiracy

among two or more persons or distinct business entities; (2) by which the persons or entities

intended to harm or restrain trade or commerce among the several States, or with foreign nations;

(3) which actually injures competition.” Kendall v. Visa U.S.A., Inc., 518 F.3d 1042, 1047 (9th

Cir. 2008). To demonstrate injury to competition, a plaintiff must “prove the relevant market and

show the effects of competition within that market.Adaptive Power Solutions, 141 F.3d at

951.

10 In the same amicus curiae brief, the DOJ took the position that hiring restrictions among

competing NFL franchises should be evaluated under the rule of reason:

teams from poaching one another’s coaching talent

course, such a rule might be reasonable, and thus lawful. The scope and substance of that inquiry

would depend on factors such as

competition.” Brief for the United States as Amicus Curiae Supporting Petitioner at 20 & n.10, Am. Needle, Inc. v. Nat’l Football League, No. 08-661, 2009 WL 3070863, at *20 and no. 10

“[A] rule forbidding

Of

[w]ould be an agreement

the rationale for its adoption, and the nature of its effect on

(citations omitted) (Sept. 25, 2009).

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The Complaint explicitly declines the opportunity to state a claim under the traditional

rule of reason. It does not seek to define a market, assert that eBay (with or without Intuit) had

market power in such a market, or allege facts demonstrating that eBay’s policy actually had

marketwide effects. It does not even explain how eBay’s policy could have such an effect.

Instead, the Complaint asserts that the Court should presume the existence of such marketwide

effects under the per se rule or through “an abbreviated or ‘quick look’ rule of reason analysis.”

(Compl. ¶¶ 4, 28–29.)

This assertion is both novel and wrong as matter of law.

The Complaint’s attempt to extend the scope of the per se rule and “quick look” doctrine

should be rejected for four reasons: (1) per se condemnation is reserved for agreements and

practices that are plainly anticompetitive and, even then, plaintiffs are expected to explain how

the challenged conduct would actually suppress output or increase price; (2) no court has ever

before applied the per se rule to strike down a bilateral agreement regarding recruiting or hiring

as per se illegal; (3) “quick look” is reserved for conduct that closely resembles price fixing that

applies on a nearly market wide basis; and (4) the remedy accepted by the DOJ to resolve its

earlier enforcement actions confirms that no impact to competition should be presumed or

assumed to flow from eBay’s alleged conduct.

1. The DOJ Cannot Avoid Its Obligation To Establish That The Alleged Agreement Unreasonably Restrained Trade Simply By Labeling It Per

Se Unlawful.

The Complaint fails to allege facts that explain how the challenged conduct could produce

the kind of impact on demand for labor necessary to support an antitrust claim. It simply

announces that the alleged agreement is per se unlawful and claims that, as a result, “[n]o

elaborate industry analysis is required to demonstrate the anticompetitive character of this

agreement.” (Compl. ¶ 28.) But unilateral proclamation is not a substitute for legal analysis.

The fact that the Department has labeled the challenged conduct per se unlawful does not

make it so. In a series of cases that stretches back four decades, the Supreme Court has limited

the application of the per se rule to the discrete categories of price fixing and bid rigging. See

Leegin Creative Leather Prods. v. PSKS, Inc., 551 U.S. 877 (2007); State Oil Co. v. Khan, 522

U.S. 3 (1997); Continental T.V., Inc. v. GTE Sylvania Inc., 433 U.S. 36 (1977). These cases also

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1

make clear that the per se rule does not apply outside of hard core antitrust violations. See

2

Leegin, 551 U.S. at 894 (“Notwithstanding the risks of unlawful conduct, it cannot be stated with

3

any degree of confidence that resale price maintenance ‘always or almost always tend[s] to

4

restrict competition and decrease output.’”) (quoting Bus. Elec. Corp. v. Sharp Elec. Corp., 485

5

U.S. 717, 723 (1988)); GTE Sylvania, 433 U.S. at 49–50 (“Per se rules of illegality are

6

appropriate only when they relate to conduct that is manifestly anticompetitive.”).

See also N.

7

Pac. Ry. Co. v. United States, 356 U.S. 1, 5 (1958) (agreements are unlawful per se where they

8

have a “pernicious effect on competition and lack

any redeeming virtue”).

 

9

Broadcast Music, Inc. v. Columbia Broadcasting System, Inc. (“BMI”), 441 U.S. 1 (1979),

10

goes one step further, holding that even where conduct can be labeled price fixing, the label “does

11

not alone establish that [it] is ‘plainly anticompetitive’ and very likely without ‘redeeming

12

virtue.’” Id. at 9. In BMI, the Court faced a Section One claim brought by a television station

13

against two organizations that, between them, controlled “[a]lmost every domestic copyrighted

14

composition” due to their widespread membership comprised of composers, authors, and

15

publishers. Id. at 4–6. The television station alleged that the defendants’ practice of issuing

16

“blanket licenses”—or licenses to use any of the copyrighted works for a fixed fee—constituted

17

price fixing, a recognized per se violation of Section One. Id. at 6. After the Second Circuit

18

reinstated a complaint that had been dismissed below, the Court reversed.

 

19

BMI explains that courts must decline to apply the per se rule and instead analyze conduct

20

under the rule of reason where there is an insufficient history of rule of reason cases finding the

21

conduct anticompetitive. Surveying the many cases that had challenged blanket licenses, BMI

22

observes that “there is no nearly universal view that either the blanket or the per-program licenses

23

issued by [defendant] at prices negotiated by it are a form of price fixing subject to automatic

24

condemnation under the Sherman Act, rather than to a careful assessment under the rule of

25

reason.” Id. at 16. On that basis, BMI reverses the Second Circuit and remands for “a more

26

discriminating examination under the rule of reason.” Id. at 24. See also ANTITRUST LAW

27

DEVELOPMENTS (SEVENTH), at 56 (collecting cases and observing that “the per se rule should be

28

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invoked only on the strength of unambiguous judicial experience” demonstrating that the

challenged conduct is necessarily anticompetitive).

Since BMI, courts have limited the application of the per se rule to conduct that directly

affects price or output. This means price fixing, bid rigging, and market division. They, and they

alone, are “the paradigmatic examples of restraints of trade that the Sherman Act was intended to

prohibit.” NCAA, 468 U.S. at 107–08. See also Pool Water Prods. v. Olin Corp., 258 F.3d 1024,

1034 (9th Cir. 2001) (“[T]he antitrust laws are only concerned with acts that harm ‘allocative

efficiency and raise[] the price of goods above their competitive level or diminish[] their

quality.’”) (quoting Rebel Oil., 51 F.3d at 1433)). The Complaint alleges no effect on price or

output, and should be dismissed based on that failure.

2. No Court Has Found An Antitrust Violation Based On An Agreement Regarding Hiring Practices Without Considering Facts Regarding

Market Power And The Effect Of The Alleged Restraint On the Market.

The Complaint offers no explanation for why an agreement between a firm and a member

of its board of directors to refrain from recruiting or hiring employees from a single other

company affiliated with the board member should be added to a limited list of per se violations.

Even assuming that such an agreement is a cognizable agreement for purposes of the Sherman

Act, the assertion finds no support in case law or economic theory. Indeed, no court has ever

applied the per se rule to find a bilateral agreement between potential employers regarding hiring

practices per se illegal, 11 and the few courts that have considered such arrangements have

uniformly applied the rule of reason, carefully considering the underlying facts in evaluating the

legality of the challenged conduct.

In Bogan v. Hodgkins, 166 F.3d 509 (2d Cir. 1999), the Second Circuit addressed a

business structure in which an insurance company consisted of independent contractor “General

11 Cf. In re High-Tech Employee Antitrust Litig., 856 F. Supp. 2d 1103, 1122 (N.D. Cal. 2012) (finding that the plaintiffs had successfully pled a per se violation of the Sherman Act for

purposes of a Rule 12(b)(6) motion based on allegations of an industry-wide conspiracy to restrict competition for skilled labor, but declining to decide whether the per se rule would ultimately

apply).

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Agents” who in turn contracted with lower-tier sales agents. The General Agents agreed not to

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recruit or hire sales agents employed by other General Agents. Two sales agents unable to

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transfer sued. After considering whether the conduct fell into any previously-recognized per se

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categories, the court concluded that no easy label applied. Id. at 515. For example, the

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agreement was not a territorial or customer allocation because the record revealed no geographic

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or market division, and it was not a supplier allocation because the current agents were not the

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only suppliers of such services. The agreement thus did not “allocate the market for agents to any

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meaningful extent.” Id. Ultimately, although the court found that the agreement was properly

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characterized as an intrafirm agreement, it emphasized that “[e]ven if the Agreement were

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interfirm, [the court] would still not afford it per se illegal treatment.” Id. The court noted that

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no-switching agreements were “distinguishable from those boycotts that have been held illegal

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per se.” Id. (citing Union Circulation Co. v. FTC, 241 F.2d 652, 657 (2d Cir. 1957)). While such

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agreements “fall within the ambit of antitrust law,” they are not afforded per se treatment because

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the harmful effect on competition is not clearly apparent. Id. Because the agreement’s

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anticompetitive effect on the market for insurance sales agents was not obvious, the court did not

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find that the plaintiffs made a case sufficient to justify per se treatment. Id.

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Similarly, in Union Circulation Co., agencies in the business of selling magazine

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subscriptions by door-to-door solicitation entered into “no-switching” agreements with each

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other, providing that they would not hire solicitors who had been employed by the other agency

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during a certain time period. 241 F.2d at 655. The court distinguished the no-switching

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agreements from per se illegal group boycotts. The no-switching agreements were “directed at

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the regulation of hiring practices and the supervision of employee conduct, not at the control of

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manufacturing or merchandising practices,” and “a harmful effect upon competition is not clearly

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apparent from the terms of the[] agreements.” Id. at 657. Instead, the court considered the

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agreements “within the specific framework of the magazine-selling industry and in the light of the

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fact that the signatory parties represent a very substantial segment of that industry,” ultimately

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finding the agreement unlawful. Id.

 

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In Nichols v. Spencer International Press, Inc., 371 F.2d 332 (7th Cir. 1967), the court

considered a “no-switching” agreement between companies in the business of selling reference

books in which the companies refused to hire employees of a competitor for six months after

termination of the former employment. The court noted that “[a]greements not to compete are

tested by a standard of reasonableness”; because “further inquiry into the facts” was needed, it

reversed the district court’s grant of summary judgment. 12

Id. at 337.

In a more recent case, Eichorn v. AT&T Corp., 248 F.3d 131 (3d Cir. 2001), the Third

Circuit considered whether a “no hire” agreement that provided that the seller of a company

“would not hire, rehire, retain, or solicit the services of” any employee of the company being sold

whose annual income exceeded $50,000 violated Section One. Id. at 136–37. The plaintiffs

contended on appeal that the no-hire agreement was per se unlawful as either a group boycott or a

horizontal price fixing conspiracy. Id. at 142. The court rejected the plaintiffs’ attempt to allege

a per se antitrust violation by affixing a label to the challenged conduct, noting that “there are no

Supreme Court cases nor any federal cases that have applied the per se rule in similar factual

circumstances.” Id. at 143. Instead, the court looked to the “totality of the circumstances” and

analyzed the no-hire agreement under the rule of reason, ultimately holding that it was not an

unreasonable restraint of trade because “[a]ny restraint on plaintiffs’ ability to seek employment

was incidental to the effective sale” of the company. Id. at 145–

46.

at [the restricted employer]

Similarly, in Aydin Corp. v. Loral Corp., 718 F.2d 897 (9th Cir. 1983), the Ninth Circuit

considered the legality of a termination agreement between a company (and its subsidiary) and its

former employee, Moyes, that obligated him to not “now or in the future

raid[] [the company’s] employees

employees from the company, the company filed suit alleging breach of contract and unfair

interfer[e] with or

.” Id. at 899. After Moyes’s new employer hired away ten

12 The Nichols