Antitrust Law Daily Wrap Up, ANTITRUST NEWS: LG, Samsung allegedly engaged in conspiracy to suppress employee compensation, (Sep 12, 2016)

By Linda O’Brien, J.D., LL.M.

South Korean conglomerates LG Corporation and Samsung and their domestic subsidiaries have engaged in an unlawful conspiracy to fix and suppress the compensation for their employees by entering into non-solicitation agreements to not recruit or directly hire each other’s employees, according to a complaint filed by a former LG employee in the federal district court in the Northern District of California (Frost v. LG Corp., September 9, 2016).

LG Corporation and Samsung Group are two of the largest business conglomerates in South Korea which focus primarily on the design and manufacturing of electronics, computers, communications, and consumer products. A. Frost worked as a sales manager for LG in Northern California.

According to the complaint, LG and Samsung have had a long-standing agreement not to solicit or hire one another’s workers and this policy extends to all LG and Samsung affiliates. By eliminating competition between them, the companies have foreclosed the most likely alternative workplace for their employees. Because the corporate cultures of LG and Samsung are so similar and they have comparable product lines, each company is where the other company’s employees are the most marketable.

In a competitive labor market, the complaint alleges, LG and Samsung would each compete for employees and there would be significant mobility between the two companies. Competition and mobility allow the workforce to demand and collectively receive higher wages, benefits, and other compensation. However, in October 2013, the plaintiff was contacted by a recruiter seeking to fill a position at Samsung. Subsequently, the recruiter informed him that a mistake was made since Samsung had agreed not to "poach" employees from LG. Prior to the interaction with the recruiter, the plaintiff was unaware the LG and Samsung had an agreement not to recruit or hire one another’s employees.

The complaint also states that, in 2010, a human resources official at LG confirmed that LG and Samsung "have an understanding not to hire from each other across levels." The agreement referenced the official applies to the defendants’ workers in the United States and has at all times been kept secret from United States employees. By restricting the hiring and solicitation of each other’s employees, the defendants have eliminated the most likely source of competition for skilled labor. The anticompetitive effects of the defendants’ agreement have lowered the competition and mobility of their employees below what would have prevailed in a competitive labor market, the complaint claims.

The plaintiff asserts claims for violations of Section 1 of the Sherman Act as well as California’s Cartwright Act, Unfair Competition Law (UCL), and anti-covenant not to compete law (California Business and Professions Code Section 16600). The action seeks declaratory and injunctive relief, restitution, disgorgement, treble damages, pre- and post-judgment interest, costs of suit, attorney fees, and any other just and proper relief.

The case is No. 5:16-cv-05206.

Attorneys: Joseph R. Saveri, Matthew S. Weiler, and Kyla J. Gibboney (Joseph Saveri Law Firm, Inc.), Stuart G. Gross (Gross & Klein LLP), Eric L. Cramer and Michael J. Kane (Berger & Montague, P.C.), Vincent J. Esades (Heins Mills & Olson, P.L.C.), and John Radice (Radice Law Firm, P.C.) for A. Frost.

Companies: LG Corp.; Samsung Group

News: Antitrust CaliforniaNews