Thursday October 8, 02:47 AM
UPDATE 3-US Justice Dept opens IBM antitrust probe
By Diane Bartz
WASHINGTON, Oct 7 (Reuters) - The U.S. Justice Department has opened an investigation into allegations that International Business Machines abused its dominance of the mainframe business to squeeze rivals, said Computer and Communications Industry Association chairman Ed Black on Wednesday.
The CCIA had urged the Justice Department to open the probe, accusing IBM (NYSE: IBM - news) 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 (PSCPE.OB - news) to stifle competition.
The nonprofit trade group -- which counts software giants Microsoft (NASDAQ: MSFT - news) and Oracle (NASDAQ: ORCL - news) 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 (NYSE: HPC - news) is open-source software that allows IBM's mainframe operating systems to run on Intel (NASDAQ: INTC - news) -based and Advanced Micro Devices (NYSE: AMD - news) -based personal computers.
'We are aware that Justice has begun the CID investigatory process,' said Black. A CID is the equivalent of a subpoena and indicates that an investigation is under way. 'The scope is quite broad,' said Black, who heads the CCIA, a trade association with a wide range of high-tech members. One of its focuses is antitrust, said Black.
IBM did not respond to repeated requests for comment. A spokeswoman for the Justice Department declined comment.
Black said the decision reflected 'a pledge by the Obama administration that they're going to take antitrust seriously. They mean it.'
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 Sept. 30.
The Justice Department 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 telecommunications companies for potential antitrust violations. Smaller telecommunications firms have long complained that the giants -- AT&T and Verizon Communications -- used their market share to squeeze out smaller rivals.
Smaller companies have also protested against the exclusive deals that cell phone companies made with handset makers, among other issues.
'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.'
(Reporting by Diane Bartz; Editing by Gary Hill) Keywords: IBM/ANTITRUST
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