CCIA Applauds EU Scrutiny of IBM

File Under: News, AntiTrust

Apr 24, 2008

Washington, D.C. -- According to recent press reports, European Union antitrust enforcement officials have asked International Business Machines (IBM) for information about its mainframe computer business in response to an antitrust complaint filed by a small competitor, Platform Solutions, Inc (PSI).   The inquiry could be the first step towards a formal investigation of unfair dealings by IBM, which is the world’s dominant supplier of mainframe hardware and software.  
 
CCIA welcomes the EU inquiry and encourages EU regulators to act expeditiously, if necessary, to ensure the integrity and competitiveness of the vital mainframe market.

“We applaud the EU for examining IBM’s mainframe monopoly, which costs governments millions and stifles innovation through its use of locked-in, proprietary technology,” said CCIA President Ed Black.  “Once again it appears the EU is stepping up to enforce antitrust laws while the US Justice Department continues to ignore anti competitive threats in the high tech industry.  As we have previously stated, competition issues are central to the evolution of the global technology industry, and the European Union has proved itself to be an important and respected venue where these issues are addressed thoroughly and fairly."

The mainframe computer market is uniquely important, and IBM has long held a dominant position in it.

"What is amazing is the similarity of the alleged abuse to the earlier and historic antitrust case against IBM in the 70's and 80's, and the more recent cases against Microsoft. This is deja vu,” Black said.  

CCIA was deeply involved in the earlier IBM and Microsoft cases.  IBM is accused by PSI of anticompetitive behavior by refusing to license its z/OS software to purchasers of PSI mainframe hardware. PSI also alleges that IBM has refused to supply critical interface information for mainframe computers to PSI.

Between 70 and 80 percent of the world’s corporate and government data resides in a proprietary format that is only accessible by or through mainframe computers, and 94 percent of Fortune 1000 companies use mainframes for their critical data management needs.   IBM itself has estimated that $5 trillion worth of business and government applications run on its mainframes worldwide.

“The market for mainframes might be invisible to ordinary Americans, but it is one that is critical to our economy and security. In fact, more commercial transactions are processed on mainframes than on any other platform. And yet, the mainframe market is completely dominated by one company—IBM—with well over 90% market share,” Black said.
 
It does not help IBM's claims of innocence in the antitrust arena that it was recently banned for a period of time from all new U.S. government contracts after the Environmental Protection Agency uncovered evidence indicating misuse of a competitor’s confidential data by IBM employees in pursuit of an EPA contract.   The EPA investigation is ongoing, and the U.S. Attorney in the Eastern District of Virginia is investigating possible criminal violations by the same IBM employees.  
 
“IBM’s mainframe monopoly practices have already helped drive large and small competitors from the marketplace; PSI is just the latest victim targeted, but one with the gumption to fight back.” said CCIA President Ed Black.  “PSI could be the Netscape of the mainframe world – let’s hope regulators can prevent it from suffering the same fate as Netscape by forcing IBM to play fair.  It deserves the chance to survive and thrive based on the merits of its product in a fair and open marketplace.”
 
About CCIA:
CCIA is an international, nonprofit association of computer and communications industry firms, representing a broad cross section of the industry. CCIA is dedicated to preserving full, fair and open competition throughout our industry. Our members employ more than 600,000 workers and generate annual revenues in excess of $200 billion.