IBM probed for antitrust violations on mainframes
Last Updated: Thursday, October 8, 2009 | 2:03 PM ET
The Associated Press
IBM's antitrust problems stretch back to the 1950s and its tabulating machines. (Mark Lennihan/Associated Press)The U.S. Justice Department is looking into allegations that IBM has abused its dominant position in the market for mainframe computers, the data-crunching heavy lifters of the computing world that the company introduced in the 1960s and that are now used to process some of the most sensitive data in banking, government and health care.
The accusations stem from claims by IBM rivals that they've been illegally frozen out of the mainframe market because of the company's refusal to allow its mainframe operating software to run on non-IBM computers. IBM doesn't have many rivals that make mainframe computers anymore, but some smaller companies are trying to develop technologies that would allow the software to run on cheaper hardware.
They allege that IBM, which used to license its mainframe software to competitors and for the last half of the previous century operated under an antitrust agreement with the U.S. government, stopped doing so in recent years to choke off competition.
Known for their reliability, mainframes can cost $1 million or more each and are behind many everyday transactions. Withdrawing cash from an ATM, for example, often involves the ATM pinging a mainframe at the bank where the customer's data is stored to make sure there's enough money in the account.
The Computer and Communications Industry Association, an industry organization that complained to the U.S. Justice Department last month about IBM's behaviour, said Wednesday the government has started examining its allegations by sending out formal requests for information about the mainframe market to IBM rivals.
"IBM will tell big customers that if you buy that other stuff, we're not going to let that stuff talk to our stuff," said Ed Black, chief executive of the trade group. "We think of the internet as open and innovative, but that's a lock 'em up and keep 'em locked up strategy. That's very unsatisfactory for the customer base."
One of the companies that received a request from the Justice Department was Tampa, Fla.-based T3 Technologies, which in January lodged a formal complaint against IBM with European antitrust regulators and is suing the company in the United States alleging antitrust abuses.
The company, a reseller of IBM mainframes from 1992 to 2002, says IBM has tried to thwart its expansion into making mainframes by denying it licences for software, something done "for no reason other than to remove all competition from the mainframe market."
T3's president, Steven Friedman, didn't respond to messages from The Associated Press late Wednesday.
The Justice Department would not comment on a potential antitrust investigation.
In a statement, IBM pointed to a decision last week by a judge in the U.S. District Court for the Southern District of New York dismissing T3's complaint against IBM.
"We understand the Department of Justice has asked T3 for documents from the litigation," IBM said. "We continue to believe there is no merit to T3's claims, and that IBM is fully entitled to enforce our intellectual property rights and protect the investments that we have made in our technologies."
Armonk, N.Y.-based IBM said it will co-operate with any inquiries from federal authorities.
That case stems from a conflict between the company and Platform Solutions, whose technology was used to run IBM's mainframe operating software on non-IBM computers. Platform had also complained to European regulators about the company's conduct, until IBM bought it last year and both firms dropped their lawsuits against each other.
T3 had joined the case on Platform's side.
IBM's clashes with antitrust authorities go back decades. For nearly 50 years the company operated under an agreement with the government that sought to limit its power in certain markets. The agreement, a so-called antitrust consent decree, was struck in 1956 to settle allegations of monopoly abuse in the market for electronic tabulating machines. It also covered computers, and parts of it gradually phased out until all provisions were dropped in 2001.
The company's last clash with authorities was a 13-year fight that stretched from 1969, when the U.S. government filed a separate antitrust lawsuit against the company, until 1982, when the case was dropped.
Share Tools
Top News Headlines
- Canadian Pacific strikers face back-to-work legislation
- Labour Minister Lisa Raitt is prepared to end the Canadian Pacific Railway strike if necessary, after both CP and the union rejected a proposal for voluntary arbitration by the government-appointed negotiator on Sunday. Raitt says she is "extremely disappointed."
more »
- Quebec students and province to resume talks
- Quebec's university student federation has confirmed negotiations between student leaders and the provincial government will resume Monday afternoon. more »
- Tropical storm Beryl strikes southeast U.S. coast
- Tropical storm Beryl has arrived at the southeastern U.S. coast, bringing heavy rain, winds and the possibility of flooding. more »
- Ryder Hesjedal wins prestigious Giro d'Italia
- Victoria native Ryder Hesjedal has become the first Canadian to win one of the cycling world's three Grand Tour events, wrapping up the 2012 Giro d'Italia with an excellent performance in the final stage in Milan. more »
- Tony Blair testifies at U.K. phone hacking inquiry
- Former British prime minister Tony Blair is questioned by an inquiry into media ethics set up to deal with the fallout from the phone hacking scandal at Rupert Murdoch's News Corp. media empire. more »
Latest Business Headlines
- Bankia asks Spain for €19B
- The board of directors of Spain's troubled bank, Bankia, has asked the Spanish government for €19 billion ($24.5 billion Cdn) in financial support. more »
- EI reforms aim to boost employment, Flaherty says
- Finance Minister Jim Flaherty defended his government's proposals to change employment insurance, saying the aim is to remove "disincentives to employment." more »
- Employment Insurance review boards to be scrapped
- The federal government is scrapping two review boards used by people appealing decisions made about their employment insurance. more »
- Ottawa moves to limit foreign investment reviews
- The federal government is raising to $1 billion the amount of foreign money that can go into a Canadian company before the investment is reviewed. The review has been used in the past to block foreign takeovers of MDA and Potash Corp. more »
Lang & O'Leary Exchange
Markets
| Index | Last Trade | Change |
|---|---|---|
| TSX COMPOSITE | 11576.47 | 0 |
| DOW | 12454.83 | 0 |
| NASDAQ | 2837.53 | 0 |
| SP 500 | 1317.82 | 0 |
| NYSE COMPOSITE | 7534.32 | 0 |
| AMEX | 2227.37 | 0 |
| TSX-VENTURE | 1309.27 | 0 |
The data on this site is informational only and may be delayed; it is not intended as trading or investment advice and you should not rely on it as such.
Business Features
- Seniors float above Montreal's Quartier Latin
- Remains found in bag on Cape Breton river ID'd
- Accused in blast that killed Alberta mom handled her funds
- Neighbour may have helped find missing kids in Mexico
- Quebec students and province to resume talks
- Lip-dub marriage proposal an internet hit
- Runner dies after collapsing in Cape Breton race
- Canadian Pacific strikers face back-to-work legislation
- Syrian regime denies role in Houla massacre

