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Online auction house eBay has been accused of harming competition by entering into a recruitment pact with software firm Intuit, under which the two agreed not to hire the other's staff.
A lawsuit brought by the State of California and the US Department of Justice (DoJ) alleges the agreement was brokered by former eBay chief executive Meg Whitman and Intuit's founder Scott Cook.
"The pact harmed employees and it harmed competition," said California attorney general Kamala Harris.
"If California is going to continue to be the high-tech capital of the world, we can't allow anti-competitive conduct that prevents talent from going where it's put to its highest use."
The lawsuit alleges that eBay and Intuit had a will-not-recruit agreement from 2006 to 2009. Government officials say the agreement prevented employees from seeking better paying jobs.
While Intuit is mentioned in the lawsuit the company is not being sued by the DoJ.
An Intuit representative said in a statement that the firm has spoken with the DoJ and will not be a defendant in the case.
"The DoJ's lawsuit against eBay mentions Intuit, but we have already resolved any concerns that the DoJ had about our recruiting practices and believe the matter for Intuit is closed," the Intuit representative said.
EBay has denied the allegations. The firm says that the lawsuit is overstating antitrust laws for the case.
"EBay strongly believes that the Department of Justice and California Attorney General are wrong and are using the wrong standard in these matters. We compete openly for talent in a broad, diverse global market across a range of industries and professional disciplines," an eBay representative said.
"[EBay's] hiring practices conform to the standards that the Department of Justice has approved in resolving cases against other companies. The DoJ and state attorney general are taking an overly aggressive interpretation in their enforcement of antitrust law in this area. eBay will vigorously defend itself."
This isn't the first major anti-competitive hiring suit to hit Silicon Valley. Last year, a former software engineer alleged that Adobe, Apple, Google, Intel, Intuit, Lucasfilm and Pixar agreed to will-not-hire deals.