Europe begins antitrust probes into IBM

The two formal European Commission investigations centre on IBM's mainframe business, including its bundling of hardware and software, and its behaviour toward rival service suppliers

The European Commission has launched antitrust proceedings against IBM over two cases of alleged anti-competitive behaviour in the mainframe market.

The first formal investigation, announced on Monday, follows complaints to the Commission by T3 and Turbo Hercules. The two emulator software vendors claim that IBM unfairly bundles its z-architecture mainframe hardware with its mainframe software.

"IBM is alleged to have engaged in illegal tying of its mainframe hardware products to its dominant mainframe operating system," the Commission said in a statement. "The complaints contend that the tying shuts out providers of emulation technology which could enable the users to run critical applications on non-IBM hardware."

The second investigation, introduced the same day, arises from the European regulators' own worries over whether IBM has discriminated against competing suppliers of mainframe maintenance services.

"The Commission has concerns that IBM may have engaged in anti-competitive practices with a view to foreclosing the market for maintenance services (i.e. keeping potential competitors out of the market), in particular by restricting or delaying access to spare parts for which IBM is the only source," the Commission said.

The European probes are separate to those being carried out by the US authorities into IBM's mainframe market dominance, although the Commission is assisting in those inquiries too.

IBM has a dominant share of the European mainframe server market. According to the Commission, around €3bn (£2.5bn) was spent on new mainframe hardware and operating systems in the European Economic Area during 2009.

In response to the EC announcement, IBM noted that analyst firm IDC has calculated that in Europe last year, mainframe sales accounted for just 0.02 percent of servers shipped and less than 10 percent of total server revenues. It contrasted these figures with those for Intel-based systems, which accounted for more than 96 percent of all server shipments and nearly 55 percent of total server revenues.

"Certain IBM 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 said in a statement.

"The accusations made against IBM by TurboHercules and T3 are being driven by some of IBM's largest competitors — led by Microsoft — who want to further cement the dominance of Wintel servers by attempting to mimic aspects of IBM mainframes without making the substantial investments IBM has made and continues to make. In doing so, they are violating IBM's intellectual property rights," the company added.

IBM concluded by saying there is "no merit to the claims being made by Microsoft and its satellite proxies".

One of the complainants, TurboHercules, has published correspondence between it and IBM on its website. In July 2009, the company — the commercial arm of the open-source Hercules project — asked IBM if it could license its modern 64-bit operating systems such as z/OS, z/VM and z/VSE, as well as its older 31-bit and 24-bit operating systems. These would be run in TurboHercules' virtualised environment on Intel-based servers.

"Because the lasting success of the IBM mainframe platform is the prerequisite for our own success, it is very important to us to secure IBM's approval for our business model, TurboHercules president Roger Bowler wrote.

IBM refused, saying TurboHercules infringed on its intellectual property. The company asked IBM to reconsider, pointing out that Hercules had been "widely used in the development community, as well as within IBM itself, over the past 10 years" and expressing surprise at the claim of intellectual property infringement.

It also asked IBM to identify the alleged infringements and suggested that any relevant patents might be added to the portfolio of patents that IBM has pledged to free use in the open-source community. IBM replied with a list of potentially contravening patents and a further refusal to allow the licensing requested by TurboHercules.

That refusal led to accusations of IBM breaking its open-source pledge, which it denied doing.

The other complainant, Florida-based T3, welcomed the European investigations. "We've felt all along that through a prism of just the fact 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," T3 president Steven Friedman said in a statement.

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