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.
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