IBM offers concessions to EU on mainframes

IBM has moved closer to settling a year-long probe by European regulators into its mainframe computer businesses, offering a series of concessions that could spare the US group from a fine.

European Union competition authorities opened two separate antitrust investigations into IBM’s mainframe business last year, examining whether the group was exploiting its dominance in maintenance services or tying hardware to its mainframe operating system.

Although the competition commission’s preliminary assessment concluded that IBM “may have imposed unreasonable supply conditions ... on its competitors in the maintenance market”, the EU regulators agreed to drop the maintenance case if IBM’s proposed concessions satisfied its market rivals.

Meanwhile, the EU abandoned a separate, highly controversial investigation into the tying of hardware to the mainframe operating system after three would-be rivals of IBM retracted their complaints. IBM claimed the protests had been orchestrated by “Microsoft and its satellite proxies”.

IBM denied that it was abusing its position or blocking rivals in mainframe maintenance. However, as part of the proposed settlement, IBM made commitments to assuage the commission’s competition concerns.

These include contractual arrangements that will make it easier for competitors to obtain spare parts and technical information on broadly the same terms as IBM’s own maintenance teams. The commitments last for five years.

The proposed deal, which IBM’s rivals are invited to comment on, is a big step in lifting the regulatory cloud that has hung over the US group’s European mainframe business, which remains one of its most profitable activities.

It also underlines the willingness of Joaquín Almunia, EU competition commissioner, to settle antitrust cases without resorting to fines.

Such settlements allow companies to avoid fines and costly damage claims from victims of market abuse, while the commission is spared from having to defend its ruling in the courts on appeal.

Mainframes are machines that handle high-volume processing. While they are no longer a cutting-edge technology, they still handle the vast majority of corporate data and remain a core part of IBM’s business.

Mr Almunia said: “I commend IBM’s readiness to address our concerns about fair competition in the market for large computers, which are crucial for the functioning of today’s economy.”

IBM said it “welcomed” the commission‘s decision to close the investigation into its mainframe business. “IBM also welcomes the proposed resolution of the commission’s investigation of certain IBM mainframe maintenance practices.

“IBM has put in place certain ... parts ordering procedures, and we look forward to providing the basis for the final resolution [of the case],” it said.