Justice Department opens IBM antitrust probe

WASHINGTON (Reuters) - The U.S. Justice Department is investigating allegations that International Business Machines abused its dominance of the mainframe business to squeeze rivals, Computer and Communications Industry Association Chairman Ed Black said on Wednesday.

The sign at the IBM facility near Boulder, Colorado September 8, 2009. REUTERS/Rick Wilking

The CCIA had urged the Justice Department to open the probe, accusing IBM of withdrawing licenses for its operating systems from customers who use non-IBM hardware, retaliating against business partners deemed disloyal, bundling its mainframe operating systems with hardware and acquiring startup PSI to stifle competition.

The non-profit trade group -- which counts software giants Microsoft and Oracle, but not IBM, as members -- also alleged that IBM refused to license its mainframe operating systems to users of “Hercules” for installation on machines other than IBM mainframes.

Hercules is open-source software that allows IBM’s mainframe operating systems to run on Intel-based and Advanced Micro Devices-based personal computers.

“We are aware that Justice has begun the CID investigatory process. The scope is quite broad,” said Black, adding that one of its focuses is antitrust.

A CID is the equivalent of a subpoena and indicates that an investigation is under way.

The news comes after software developer T3 Technologies had filed an antitrust suit against IBM in Manhattan federal district court. The judge threw out the suit on September 30.

A spokeswoman for the Justice Department declined comment. But IBM pointed out the T3 suit dismissal.

“Just last week, a U.S. District Court dismissed T3’s claims against IBM in their entirety. We understand the Department of Justice has asked T3 for documents from the litigation,” the company said in a statement.

“IBM intends to cooperate with any inquiries from the Department of Justice. We continue to believe there is no merit to T3’s claims, and that IBM is fully entitled to enforce our intellectual property rights and protect the investments that we have made in our technologies.”

Black, however, said the Justice Department’s decision reflected “a pledge by the Obama administration that they’re going to take antitrust seriously. They mean it.”

The probe is similar to others it has opened into dominant firms. The head of the Justice Department’s antitrust division, Christine Varney, said in May she planned to take a more aggressive approach with firms that use their market power to crush competition.

The department is also investigating telecoms companies for potential antitrust violations. Smaller telcos have complained that the giants -- AT&T and Verizon Communications -- used their market share to squeeze out smaller rivals.

Smaller firms have also protested against the exclusive deals that cellphone companies made with handset makers.

“They’re (the Justice Department) going to want to make this stick,” said antitrust attorney David Balto. “There’s good reason for IBM to be concerned.”

Additional reporting by David Lawsky and Ritsuko Ando; Editing by Gary Hill