IBM could face mainframe antitrust investigation in Europe

Alternative mainframe maker T3 Technologies files complaint with European Commission

Florida-based mainframe maker T3 Technologies Inc. said today that it has filed a formal complaint against IBM with the European Union's antitrust authority. In its complaint, T3 accuses IBM of refusing to sell its z/OS operating system to customers that want to run the software on computers made by T3.

The company wants the European Commission to investigate the prices IBM charges for its mainframe systems, saying that European mainframe buyers could save a total of $48 billion over 20 years if there was fair competition in the market. T3, which is headquartered in Tampa, based that contention on data from Peerstone Research, an IT consulting and market research firm in San Francisco.

T3's complaint hadn't reached the EC by late afternoon European time, commission spokesman Jonathan Todd said. However, the EC on its own initiative is already looking at competition in the mainframe sector, he said.

"It's not a formal investigation," Todd said. But he added that it could become one if the commission becomes convinced that there have been market abuses.

IBM, facing pressure from the U.S. Department of Justice over antitrust issues, announced in 1969 — in the midst of the mainframe's heyday — that it would stop bundling software together with computer hardware in sales.

But since then, according to T3's complaint (download PDF), IBM has taken a calculated series of actions to stop rivals such as Amdahl, Hitachi, Comparex, Platform Solutions Inc. and T3 from selling IBM-compatible mainframes, thereby giving it an exclusive lock on the market.

T3 warned last August (download PDF) that it was preparing to file the complaint with the EC's Directorate General of Competition. That was shortly after IBM acquired PSI, putting an end to a legal dispute between those two companies — a case in which T3 had wanted to participate.

That case began in 2006, when IBM sued PSI in U.S. District Court for the Southern District of New York, alleging patent infringement. PSI countersued in early 2007, accusing IBM of antitrust violations and unfair competition, and T3 asked the court to be allowed to join the case against IBM. But PSI withdrew the case after its acquisition by IBM.

U.S. taxpayers also have something to gain from T3's European action, according to the Computer and Communications Industry Association, a Washington-based trade group. Many banks and government agencies rely on mainframes and must pay the prices demanded by IBM, the CCIA said in a statement today.

The fact that a U.S. company had to go to Europe to seek relief is indicative of the vacuum in enforcement of competition laws in the U.S., the CCIA added. The group called on incoming President Barack Obama to direct the Department of Justice and the Federal Trade Commission to better protect competition in the mainframe market.

A former IBM business partner and mainframe reseller, T3 introduced its own tServer line of IBM-compatible computers at the low end of the mainframe market in 2000. It added a higher-end family of mainframes, called Liberty, in 2006.

T3 now has the financial backing of Microsoft Corp., which last November invested an undisclosed sum in the company to fund development of new products for mutual customers. Microsoft has had its own share of antitrust conflicts with the EC, which last week accused the software vendor of breaking European laws by bundling its Internet Explorer browser with Windows.

Copyright © 2009 IDG Communications, Inc.

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