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FTC Investigates Oil Firms Over Hiring, Wages



26 APRIL 2010

WASHINGTON—The Federal Trade Commission is investigating whether the world’s biggest oil companies colluded to suppress managerial, professional and technical employees’ wages in ways that violated U.S. antitrust laws, according to people familiar with the matter.

The previously undisclosed probe has been open for several years and involves as many as a dozen oil companies, including Exxon Mobil Corp., Royal Dutch Shell PLC, BP PLC and Chevron Corp, these people said. The probe remains active, they added, but the five FTC commissioners have yet to vote on the matter, and it is possible a suit will never be brought.

[FTC] Getty Images
Jon Leibowitz, chairman of the FTC, which is looking into possible oil-company antitrust violations.

The investigation is the latest evidence of concern among U.S. antitrust enforcers that the nation’s largest employers may be interfering with the labor market to hold down costs. The U.S. Department of Justice is carrying out a similar probe into whether companies in the technology sector have improperly agreed not to poach each other’s employees, according to people familiar with that matter. A spokeswoman for the Justice Department declined to comment.

The oil companies and the FTC have discussed possible settlements over the course of the investigation but have failed to reach agreement, people familiar with the matter said. Exxon, Shell, BP and Chevron declined to comment. A spokesman for the FTC wouldn’t confirm the existence of the investigation.

Agreements between companies to limit competition for workers could affect their compensation. Some recruitment experts also see a wider danger for the U.S. economy.

“Every day, companies have to go into the marketplace and compete for people,” says Charles Jones, chief executive officer of Peopleclick Authoria, a recruiting-management-software firm. “Once you start tinkering with that and creating these fiefdoms of stability, I think you’re interfering with the accumulated innovation in the economy. It’s not in the long-term interests of the country.”

The FTC’s investigation into oil-company hiring practices stems from a lawsuit brought in 1997 by a former Exxon employee, Roberta Todd, against her employer and 13 other oil companies. The suit alleged that the oil firms regularly shared information about salaries they paid managerial, professional and technical staff to set their wages at artificially low levels.

As a result, the suit alleged, Exxon alone was able to lower its salaries by $20 million a year.

The case, Todd vs. Exxon, was at first dismissed by a federal district court in New York, but the decision was overturned on appeal in 2001. The appellate ruling in favor of Ms. Todd, written by Sonia Sotomayor before she became a Supreme Court justice, was seen as putting employers on notice that exchanging salary information with their competitors could potentially violate antitrust law.

“That opinion by Sotomayor, I think now we can safely say it’s the law of the land on employer communications with regard to employees, especially if it’s a joint action,” says John Carney, a lawyer who represented Ms. Todd. However, the suit didn’t get class-action certification. Last year, the oil companies settled Ms. Todd’s suit and several others like it for an undisclosed sum, without admitting liability or wrongdoing.

About four years ago, the FTC began its inquiry into issues behind the case. Now, some FTC officials question whether the case is worth pursuing because the practices in question are likely to have ceased in the nine years since Justice Sotomayor’s appellate ruling, the people familiar with the matter said. Exxon, BP, Shell and Chevron declined to address the issue.

It isn’t necessarily illegal for companies to agree not to hire each others’ employees or even to exchange salary information, antitrust lawyers say, as long as it is narrowly focused and there is a legitimate reason for it. Companies engaged in a joint venture, for example, might reasonably agree not to hire away the employees involved.

Similarly, the Justice Department and FTC generally permit companies to conduct salary surveys, so long as the study is managed by third party and the data are more than three months old and sufficiently aggregated to make it impossible to tell which company is paying what.

But a general agreement by competitors not to hire each others’ employees—or meetings to discuss salaries—would probably violate the Sherman Act, which bans unreasonable agreements that limit competition.

Cases involving alleged collusion in hiring or compensation haven’t been a central focus of antitrust enforcement in recent times, but there are some precedents. The Justice Department has brought separate civil cases against hospitals in Utah and Arizona for allegedly conspiring to hold down nurses’ wages.

In the mid-1990s, the FTC accused clothes designers and fashion-show organizers of price fixing fees paid to runway models. All the cases were settled.

Write to Thomas Catan at [email protected]

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