IBM Offers to Settle EU Antitrust Probe, Second Case Closed

International Business Machines Corp. (IBM) offered to resolve a European Union investigation into claims the company blocked competition from rival providers of maintenance services for mainframe computers.

The European Commission, the Brussels-based EU antitrust regulator, today asked for comments on IBM’s commitments to ensure the availability of spare parts and technical data. The commission also closed a separate probe over IBM’s mainframe computers after three competitors dropped complaints.

The commission in 2010 opened investigations into Armonk, New York-based IBM over possible conduct that may have blocked competitors in mainframe software and maintenance contracts by restricting access to parts. While IBM has shifted its focus away from hardware toward its more profitable software and services businesses, the mainframe operations have high gross margins and help pull in revenue for other divisions.

“It seems that IBM has taken a pragmatic approach and determined that these commitments do not constitute a significant issue for them and that it’s preferable to get a settlement and put this probe behind them instead of fighting till the end,” Christian Riis-Madsen, an antitrust partner in Brussels at law firm O’Melveny & Myers LLP, said by telephone.

Non-Discriminatory Terms

IBM offered commitments to resolve concerns it may have imposed unreasonable conditions for supplying competing mainframe maintenance-service providers in breach of EU antitrust rules. IBM will ensure that third-party providers receive technical information “under reasonable and non- discriminatory terms,” the regulator said.

The company said in an e-mailed statement that it “welcomes” the commission’s decision “to close the investigation of IBM’s mainframe and associated intellectual property rights.” The company said it also looked forward to providing the basis for the final resolution of the probe into maintenance practices.

IBM rose 1.8 percent to $176.30 in New York Stock Exchange trading at 4:32 p.m. London time.

“IBM does not agree with the commission’s preliminary assessment” that the company may have abused “a dominant position on the market for certain inputs necessarily required for the maintenance of IBM mainframe hardware and software,” the commission said in an EU document published today.

Comments on IBM’s practices can be submitted to the commission within a month. After that, the agency will either make the commitments legally binding, without saying whether there was an infringement, or start another round of market testing if there are substantial changes to the remedies.

Google Probe

Google Inc. (GOOG) is another U.S. technology company under EU scrutiny, with a focus on whether the world’s largest Web search company has a dominant position that allows it to influence the behavior of Internet users.

EU Antitrust Commissioner Joaquin Almunia said last week that he is investigating whether Mountain View, California-based Google is a gate keeper and able to influence the behavior of Internet users. A string of antitrust probes against technology companies by Almunia’s predecessor, Neelie Kroes, resulted in 1.68 billion euros ($2.3 billion) in fines against Microsoft Corp. (MSFT) and a record 1.06 billion-euro penalty against Intel Corp. (INTC) Intel has an appeal pending.

IBM began developing mainframe computers in the 1940s and 1950s and is now among the few companies selling the systems.

“I commend IBM’s readiness to address our concerns about fair competition in the market for large computers,” Almunia said in a statement today.

To contact the reporter on this story: Stephanie Bodoni in Luxembourg at sbodoni@bloomberg.net

To contact the editor responsible for this story: Anthony Aarons at aaarons@bloomberg.net

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