DOJ Probes IBMs Mainframe Dominance

The investigation was confirmed Wednesday by Ed Black, chairman of the trade group The Computer and Communications Industry Association (CCIA), which lodged complaints against IBM, accusing it of monopolizing the mainframe market.

"We are aware that Justice has begun the CID investigatory process. The scope is quite broad," said Black. A CID is an investigatory subpoena, issued by the Acting Attorney General in charge of the Antitrust Division of the DOJ.

The CCIA charges IBM with anticompetitive actions in the mainframe arena where they possess nearly 100 percent market share, the group said in a statement. Although not visible to the average consumer, mainframes house nearly 80 percent of the worlds corporate and government data valued at nearly $5 trillion.

In translating those numbers, the association said that mainframes are used by 95 percent of the Fortune 500 companies, major governments and military around the world.

The CCIA accused IBM of withdrawing patent licenses and threatening lawsuits to stifle competition from rival hardware vendors.

IBM has locked in its customers, preventing the critical data and applications that reside in mainframes from being used by other hardware offerings, such as high-end x86 servers, the CCIA charged. In doing so IBM has locked out competition and as a result, mainframe customers have few -- if any -- viable alternatives and are forced to pay significantly higher prices for support and services.

The DOJ would not comment on the report.

Responding to the DOJ probe, IBM referred to the governments dismissal of its case with T3 Technologies last week. T3 is appealing the decision.

We understand the Department of Justice has asked T3 for documents from the litigation, said IBM spokesman Edward Barbini in a statement. IBM intends to cooperate with any inquiries from the Department of Justice. We continue to believe there is no merit to T3s claims, and that IBM is fully entitled to enforce our intellectual property rights and protect the investments that we have made in our technologies.

In January, T3, an IBM-compatible mainframe maker, filed a complaint against IBM in the U.S District Court for the Southern District of New York alleging antitrust violations and unfair competition. The company has also filed a similar claim with the European Union.

In its filing, T3 said that from 1992 until 2002, it was an important IBM business partner selling IBM mainframes. During that period T3 identified new solution opportunities in an industry dominated by IBM.

Using the new technology, T3 said it was able to make two alternative mainframe product lines. But as a result, T3 said, IBM shut T3 and any future competitors down and prevented the industry from having a choice in the mainframe market.

"For decades, IBM licensed its system software and intellectual property to other computer manufacturers, said T3 President Steven 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.