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IBM set to face anti-trust complaint from competitor

BRUSSELS (Bloomberg) - International Business Machines Corp. (IBM) will face accusations that it is abusing its dominance in mainframe computers to shut out competitors' products in violation of European Union (EU) anti-trust rules.

T3 Technologies Inc. said in a statement that it will file a complaint yesterday with the European Commission, the EU's anti-trust authority in Brussels, over claims IBM prevents the sale of competing mainframe hardware products by tying the sale of its operating system to its mainframe hardware. T3 also claims that IBM withholds "patent licenses and certain intellectual property to the detriment of mainframe customers".

"The strategy that IBM implemented was successful - we've been decimated," said T3 President Steven Friedman in an interview. "The long-term harm is for EU customers because they have no other choice than IBM."

IBM, the world's biggest computer-services company, last July acquired a mainframe maker that had raised similar complaints. IBM, based in Armonk, New York, and Platform Solution Inc. had sued each other in the US over related intellectual- property and anti-trust issues. Tampa, Florida-based T3 resold and distributed Platform Solutions' product.

T3, which had joined Platform Solutions in its legal action against IBM, decided to pursue the claim on its own and on other companies' behalf, including IBM customers, after the settlement.

Michael Kiess, a spokesman for IBM in Stuttgart, Germany, declined to comment.

T3 said it also has a pending claim against IBM in federal court in New York alleging antitrust violations and unfair competition.

Closely held T3, which sold IBM mainframes between 1992 and 2002, said it hopes the commission will probe IBM's "above- market prices for its mainframe monopoly and its actions to eliminate competition".

Mr. Friedman added that he was forced to close offices and lay-off workers in Europe when IBM stopped licensing its mainframe software to its customers. The company, which has 12 workers who serve existing customers, has not been able to sell any new computer servers that act like IBM mainframes and are 30 percent to 50 percent less expensive, he said.

Following IBM's purchase of Platform Solutions, the EU said that it is pursuing a probe into IBM and the mainframe market.

The latest complaint has similarities with a case against IBM in the early 1980s, when the commission wanted IBM to provide enough data to rivals to allow them to sell peripherals, such as storage devices, that worked as well as IBM's own products.

IBM said on October 16 that sales in the third quarter of its System Z mainframe business rose 25 percent compared to the year- earlier period. The company will release fourth quarter results yesterday.

Jonathan Todd, a spokesman for the commission in Brussels, said the regulator had yet to receive the complaint.