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DOJ Probing IBM's Mainframe Business Practices
DOJ Probing IBM's Mainframe Business Practices
By Mark Long / NewsFactor Network Like this on Facebook Tweet this Link thison Linkedin Link this on Google Plus
PUBLISHED:
OCTOBER
08
2009


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 Relevant Products/Services, 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 Relevant Products/Services 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.

Black thinks the ongoing antitrust investigation will make IBM more cautious, leading it to pull back and provide some opportunities for other companies to do more with their mainframes. The investigation is also very significant in that it will allow "companies to respond to the DOJ inquiries and be protected from retaliation," Black said.

On another legal front, T3T hopes the antitrust complaint it filed in January before the European Commission will bear fruit. In its filing, the Florida-based company accused IBM of making the purchase of its mainframe operating system contingent on the customer also purchasing IBM's hardware.

"For no reason other than to remove all competition from the mainframe market, IBM eliminated programs to allow customers to buy its mainframe software for use on non-IBM mainframe solutions," said T3T President Steven Friedman. "It also used legal threats and anticompetitive actions to shut down competitors."

T3T, which has received an undisclosed amount of financing from Microsoft, is not the only company to complain about IBM's mainframe business. Platform Solutions also took legal action against IBM, but the matter became moot in July 2008 when IBM bought the smaller company, leaving T3T to pursue legal action on its own.

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