IBM Investigated by European Commission

The European Commission has opened an investigation to find out whether IBM has abused its dominant position in mainframe computers. The formal probe confirmed on Monday that stems from the EU’s own findings in two competition probes as well as complaints by software vendors TurboHercules and T3. Both companies allow users to run applications on non-IBM hardware.


IBM is the world’s largest maker of mainframe computers, and software programs that run on IBM’s mainframes have to be compatible with IBM’s mainframe operating system as PC software has to be compatible with Windows.


IBM immediately accused Microsoft (MSFT, Fortune 500) of pushing TurboHercules and T3 to lodge complaints with the EU. Microsoft invested in both of those companies for two months before they filed their complaint against IBM.


IBM said that the EC’s accusations “are being driven by some of IBM’s largest competitors – Microsoft – who want to further cement the dominance of Wintel servers by attempting to mimic aspects of IBM mainframes without making the substantial investments IBM has made”.


 IBM  (IBM 128.41, +0.03, +0.02%) denied the charges, arguing that they’re being fueled by rivals including Microsoft Corp.  (MSFT 26.04, -0.06, -0.23%) .  IBM 128.41, +0.03, +0.02%.


The European Commission, the EU’s executive arm, revealed an investigation that stems from complaints filed by software vendors T3T Inc. — which is partly backed by Microsoft — and Turbo Hercules.


The Computer & Communications Industry Association, a group formed to focus on IBM’s market power — and which counts Microsoft, Oracle Corp. (ORCL 24.64, +0.14, +0.57%), T3T and others as members.


IBM’s last set of results showed a 19% fall in the value of outsourcing contracts – used by client companies to hand the running of their entire IT departments over to IBM.