IBM Sued over Mainframe Monopoly Claims

 
 
By Darryl K. Taft  |  Posted 2009-01-20 Email Print this article Print
 
 
 
 
 
 
 

T3 Technologies sues IBM with the European Commission for allegedly maintaining an illegal monopoly tying mainframe software and hardware. T3 had previously filed an antitrust claim against IBM in United States District Court for the Southern District of New York alleging antitrust violations and unfair competition.

T3 Technologies has announced its filing of a lawsuit against IBM with the European Commission for allegedly illegally tying mainframe software and hardware.

T3 initially announced that it was preparing to file suit in August, but has now moved forward with its complaint. On Jan. 20, T2 filed a formal complaint against IBM with the European Commission's Directorate General for Competition (DG-Comp) in Brussels. T3 has previously filed an antitrust claim against IBM in the United States District Court for the Southern District of New York alleging antitrust violations and unfair competition.

According to a T3 statement, T3's complaint alleges a history of IBM abusing its monopoly power in the mainframe industry. T3 accuses IBM of engaging in a range of anti-competitive actions, including preventing the sales of competing mainframe hardware products by tying the sale of its operating system to its mainframe hardware, and withholding patent licenses and certain intellectual property to the detriment of mainframe customers.

IBM did not respond to requests for comment on this story in time for publication.

"Despite reports in the press that the mainframe market is shrinking, nothing could be further from the truth," said Steven Friedman, president of T3 Technologies, said in a statement. "The mainframe market is not only vibrant but growing. The mainframe remains essential to the operation of just about every industry including manufacturing, banking, health care, retail and governments. In the past, companies such as Amdahl, Hitachi, Comparex, PSI and T3 used to compete in the mainframe market. However, through a calculated set of actions, only IBM now offers IBM-compatible mainframes and, based on IDC reports, controls over 99 percent of all existing IBM-compatible mainframes in use today."

T3 also accuses that "through its focused action against mainframe competitors, IBM now has an exclusive lock on the mainframe market. In IBM's most recent quarter, it announced that its mainframe business grew by 25 percent year over year. It is estimated that over 25 percent of IBM's $100 billion in revenue and 40 percent of its profits are derived from its monopoly in the mainframe market. T3 hopes that the European Commission will investigate IBM's above-market prices for its mainframe monopoly solutions and its actions to eliminate competition. According to one industry expert, it is estimated that Europeans could save $48 billion over 20 years if the mainframe market were opened up to fair competition."

Moreover, T3 officials said that from 1992 to 2002, T3 was an important IBM Business Partner selling IBM mainframes. T3 has produced two successful alternative mainframe product lines. Yet, despite this success, "IBM shut T3 and any future competitors down and prevented the industry from having a choice in the mainframe market," T3 said in a statement. "Over the past two years, T3 joined Platform Solutions Inc. (PSI) - another company affected by IBM's anti-competitive action - in legal actions against IBM. However, IBM chose to acquire PSI in July 2008, leaving T3 to pursue actions on its own behalf and on behalf of companies and customers negatively affected by IBM's monopolistic practices."

"For decades, IBM licensed its system software and intellectual property to other computer manufacturers," said Friedman. "However, 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. It also used legal threats and anti-competitive actions to shut down competitors such as T3 and PSI."

This is not IBM's first foray in court relating to its mainframe business. The company fought a protracted legal battle with the U.S. Department of Justice beginning in 1969.

The DOJ filed a complaint for the case U.S. v. IBM in the United States District Court for the Southern District of New York, on January 17, 1969. The suit alleged that IBM violated Section 2 of the Sherman Act by monopolizing or attempting to monopolize the general purpose electronic digital computer system market, specifically computers designed primarily for business. Litigation continued until 1983. However, in 1973, IBM was ruled to have created a monopoly via its 1956 patent-sharing agreement with Sperry-Rand.

Meanwhile, in related news, T3 announced the launch of a new community Web site - OpenMainframe.org - to share information related to the mainframe market and IBM's actions. 

 
 
 
 
Darryl K. Taft covers the development tools and developer-related issues beat from his office in Baltimore. He has more than 10 years of experience in the business and is always looking for the next scoop. Taft is a member of the Association for Computing Machinery (ACM) and was named 'one of the most active middleware reporters in the world' by The Middleware Co. He also has his own card in the 'Who's Who in Enterprise Java' deck.
 
 
 
 
 
 
 

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