U.S. v. IBM Round 3: DOJ Starts Antitrust Inquiry

The Department of Justice is looking into potential antitrust violations by IBM

The Department of Justice is looking into potential antitrust violations by IBM

For the third time in 60 years, the United States government has started an inquiry into possible monopolistic practices by IBM in the mainframe computer market.   Antitrust regulators from the Department of Justice have been contacting companies (including members of the Computer and Communications Industry Association, which filed a complaint about IBM with the Department) about IBM’s business practices in the space.  The association, which is supported by IBM competitors including Google Microsoft, and Oracle, claims that IBM has stymied competition in the mainframe market and blocked attempts by others to license IBM’s software.

The mainframe business comprises a significant part of IBM’s revenue; including storage systems and professional services, it adds up to at least 25%.  IBM has seen its rivals withdraw from the market as the company continued to innovate with more advanced systems.  Last week, a civil suit by IBM competitor T3, which resold computers that behaved like mainframes, was dismissed.  The court’s ruling stated that the fact that IBM had invested heavily in advancing mainframe technology without licensing it to others “does not constitute anticompetitive behavior.”

In 1952, the U.S. Government alleged that IBM had violated Sections 1 and 2 of the Sherman Antitrust Act in part because IBM only leased, and would not sell, tabulating machines.  By 1955, IBM had adopted similar practices for mainframe computers.  The matter was settled in 1956; the Final Judgment required IBM to sell as well as lease computers.  In 1969, the DOJ filed a complaint that IBM was in violation of the Sherman Act by attempting to monopolize the business computer market.  The trial lasted over six years but the complaint was withdrawn in 1982 by the DOJ, stating that the charges were “without merit.”

Jonathan B. Spira is the CEO and Chief Analyst at Basex.

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