IBM AND MICROSOFT ACCUSED OF “TYING” AND “BUNDLING” PRODUCTS IN EUROPE

During the week of January 26, 2009, IBM Inc. (“IBM”) and Microsoft Corporation Inc. (“Microsoft”) were separately accused of “tying” or “bundling” their products, in effect abusing their market dominant position, a violation of Article 82 of the European Community Treaty.
“Tying” or “bundling” products occurs when the sale of one product is conditional on the sale of different products.

The European Commission (“Commission”) received a complaint against IBM by T3 Technologies Inc. of tying its operating system with its mainframe computer hardware. Mainframe computers are used mainly by large organizations for critical applications such as bulk data processing for census, industry and consumer statistics and financial transaction processing. According to the complaint, mainframe hardware customers have been hurt due to IBM’s “exclusive lock” on the mainframe market.

Microsoft received a Statement of Objections (“SO”) from the Commission. The SO accuses Microsoft of tying its operating system, Windows, with its web browser, Internet Explorer. The Commission believes that as a result competition amongst web browsers has declined. A decade ago, Netscape accused Microsoft of the same thing in a case, which was ultimately settled.

Some legal experts criticized the Commission action as unnecessary due to the difference in the competitive landscape in Europe vs. the United States. Microsoft’s market share in Europe has declined considerably, while the web browser market has seen a number of new entrants in the past year. Microsoft believes that some of the remedies being developed by European competition authorities will force Microsoft to sell rivals’ browsers with Windows in new PCs.

Camelia C. Mazard
202-589-1837
cmazard@dbmlawgroup.com