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Federal Antitrust Probe Targets Tech Giants, Sources Say

By Cecilia Kang
Washington Post Staff Writer
Wednesday, June 3, 2009

The Justice Department has launched an investigation into whether some of the nation's largest technology companies violated antitrust laws by negotiating the recruiting and hiring of one another's employees, according to two sources with knowledge of the review.

The review, which is said to be in its preliminary stages, is focused on the search engine giant Google; its competitor Yahoo; Apple, maker of the popular iPhone; and the biotech firm Genentech, among others, according to the sources, who spoke on condition of anonymity because the investigation is ongoing.

Justice Department officials declined to comment about an investigation, as did officials from Google and Yahoo. Apple and Genentech could not be reached for comment.

The sources said the review includes other tech companies and is "industry-wide." By agreeing not to hire away top talent, the companies could be stifling competition and trying to maintain their market power unfairly, antitrust experts said.

"This could be collusive restraint on trade, which could have a serious impact on competition," said Albert Foer, president of the American Antitrust Institute.

Such an agreement would underscore the fierce competition over top engineering and business talent.

Google has long been known for its exhaustive recruiting process to find people who fit into its culture and create innovative Web technologies. In 2005, Microsoft sued Google for hiring away Kai-Fu Lee, Microsoft's vice president for Web Interactive services, to head Google's operations in China.

The review is the latest move by the administration to step up scrutiny over possible anti-competitive actions in the high-tech sector. The industry has disrupted traditional business models of advertising, media, and news, and companies like Google and Facebook have amassed strong market shares in Web search, advertising and social networking.

The Justice Department last month launched a review of the board ties between Google and Apple, which some say are competitors. The Federal Trade Commission has initiated a review of Google's settlement with book authors and publishers on digital records of their works. Obama's antitrust chief at the Justice Department, Christine Varney, has said she plans to look at the network effects of high-tech companies and how their grasp on markets has cut out competitors and hurt consumers.

Antitrust experts say that could include wireless carriers and software operators that may be blocking certain applications from running on their networks and devices.

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