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DOJ Probing IBM
DOJ Probing IBM's Mainframe Business Practices

By Mark Long
October 8, 2009 1:46PM

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IBM's mainframe business practices are the subject of a preliminary investigation by the Department of Justice. The Computer & Communication Industry Association said the DOJ is looking at "abuses." Its members include Microsoft, Google, Oracle and Red Hat. The CCIA contends that IBM has locked in its mainframe customers.

The U.S. Department of Justice has begun a preliminary investigation of IBM's mainframe business, which rivals say has been engaging in anticompetitive practices. The Computer & Communication Industry Association -- which counts Microsoft, Google, Oracle and Red Hat among its members -- said Thursday that its members have received DOJ requests for information.

"We do know that the DOJ is looking at a pretty broad range of issues concerning the overall mainframe ecosystem and the possible abuses taking place," said CCIA Chief Executive Ed Black. Investigators want to know "how locked in do customers feel, whether they would like to migrate from IBM, and to what extent has IBM's withdrawal of IP licensing been used to intimidate other companies," he said.

Protected from Retaliation

Earlier this year, the CCIA asked the incoming Obama administration to direct the FTC and the DOJ to investigate IBM's mainframe practices. Part of what creates a mainframe "lock-in" for IBM, Black said, is that many large businesses with complex systems have written specialized programs that are highly dependent on the mainframe operating system.

"If the barriers of entry and migration were lower, a lot of people would make use of other alternatives," Black said. "But IBM has made this difficult."

However, it's not clear whether the DOJ investigation will extend beyond the preliminary phase. A lawsuit charging anticompetitive behavior filed against IBM by rival mainframe hardware and software maker T3T, which is also a member of the CCIA, was recently dismissed by a U.S. District Court in New York. In his summary judgment, Judge Lewis Kaplan ruled that IBM's refusal to license its mainframe technology to others did not constitute anticompetitive behavior in and of itself.

On the other hand, Black said T3T's lawsuit has only been temporarily dismissed on standing grounds, and not on the merits of the case. He said it is a violation of antitrust law if a company builds up customer reliance in a sector of the industry and says it is going to continue open licensing under fair and equitable terms, only to withdraw access after companies have become reliant on its technology.

IBM 'Fits the Exception'

Though Black agrees that IBM's refusal to license its mainframe technology is "not an antitrust violation per se, in this case the charge fits the exception." T3T never had an opportunity "to fully argue this issue before the judge, but the DOJ is aware of the law," he said. (continued...)

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