The EC has begun two investigations of IBM's mainframe businesses. IBM already is facing lawsuits from competitors and reportedly a U.S. investigation. IBM sharply denied any wrongdoing and accused Microsoft of abetting the smaller companies complaining about IBM.
IBM's mainframe business is now under
scrutiny from European regulators, who have opened two antitrust investigations
involving Big Blue's business practices around its Big Iron portfolio.
The European Commission, the antitrust body of the European
Union, announced the investigations July 26. The development is the latest
legal headache for IBM in connection with its
System z mainframe business.
It also comes less than a week after IBM
unveiled its new zEnterprise
mainframe, designed to enable businesses to
manage workloads across systems, with the new mainframe as the central managing
here for a look at IBM's zEnterprise mainframe.
Already IBM faces lawsuits
and reportedly an investigation
by the U.S. Department of Justice
. In a statement, the EC said one of its investigations
stem from complaints from emulator software vendors T3T and TurboHercules. The
other was initiated by the commission itself.
The first investigation echoes complaints heard in the United
States. European regulators are investigating
allegations that by illegally tying its mainframe hardware products to z/OS,
its mainframe operating system, IBM has
effectively shut out competition from the likes of T3T and TurboHercules.
The second claims that IBM
is hindering competition in the mainframe maintenance services market by
restricting or delaying access to spare parts that are only available from IBM.
Both essentially focus on IBM's
dominance in a business that, while a small portion of the overall server
space, still generates millions of dollars for IBM.
IBM officials have strongly
denied previous allegations brought forth by such companies as T3T,
TurboHercules and Neon Enterprise Software, which already is suing IBM
in the United States
and last month said it would file
a similar complaint
with European regulators. IBM
officials have said that such companies are trying to make money not only by
violating IBM patents, but also by inducing
mainframe users to violate their terms of their licenses with IBM.
The announcement of the EC's investigations drew a similar
response from the technology giant.
competitors which have been unable to win in the marketplace through
investments in fundamental innovations now want regulators to create for them a
market position that they have not earned," IBM
officials said in a statement.
In addition, they pointed a finger at larger rivals,
particularly Microsoft, which they said are looking to expand the dominance of
servers based on the x86 architecture and running Microsoft software by
enabling emulators to bring mainframe workloads onto these smaller systems.
"In doing so, they are violating IBM's
intellectual property rights," IBM said
in the statement. "IBM intends to
cooperate fully with any inquiries from the European Union. But let there be no
confusion whatsoever: There is no merit to the claims being made by Microsoft
and its satellite proxies. IBM is fully entitled
to enforce its intellectual property rights and protect the investments we have
made in our technologies. Competition and intellectual property laws are
complementary and designed to promote competition and innovation, and IBM
fully supports these policies. But IBM will
not allow the fruits of its innovation and investment to be pirated by its
competition through baseless allegations."
Ed Black, president and CEO
of the Computer & Communications Industry Association, said the move by the
European regulators makes sense.
"Although we are pleased the European Commission is taking
a serious look into IBM's actions, it comes
as no surprise to us as the evidence of anticompetitive behavior is strong,"
Black said in a prepared statement. "We believe competition authorities
around the world, as they learn about and focus on this vital market, will take
Vendors like Neon, T3T and TurboHercules claim that their
products enable System z users to save money on their mainframe workloads by
giving those users a legitimate alternative to an all-IBM
Neon's software product, zPrime, enables IBM
mainframe customers to avoid paying some licensing fees by moving workloads off
the System z's central processor to less expensive specialty processors, such
as zAAP and zIIP, from IBM. Big Blue
officials claim doing so violates a customer's licensing agreement with IBM,
though Neon officials disagree. Neon filed suit against IBM
in December, saying that IBM's business
tactics were unfairly driving customers away.
IBM in January filed its
own suit against Neon
Products from emulators such as T3T and TurboHercules enable
System z customers to run their mainframe workloads on non-IBM,
non-mainframe systems. T3T executives applauded the EC's decision to
"We've felt all along that through a prism of just the
facts of our case, the commission and others would find enough compelling
documentation on IBM market abuses to
warrant a complete investigation into IBM's
practices over the past decade," T3T President Steven Friedman said in a
statement. "We're hopeful that other judicial agencies will come to the
T3T's lawsuit, filed in New York,
was dismissed in September 2009. The company is appealing the decision.