March 07, 2001, 1:53 PM — Imagine a high-tech company so powerful that the only body that could rein it in was the U.S. government.
Federal prosecutors charged that the company used every trick in the monopolist's handbook to harm competition: price fixing, preannouncing products never intended to see the light of day, preventing its dominant product from interfacing with its rivals' gear.
Not so fast. Before Microsoft Corp. even existed, IBM dominated the computer business so completely that the only thing that could blunt its force enough to open markets to competitors was a set of restrictions stemming from a decades-long antitrust battle.
Although the major antitrust lawsuit against IBM, launched by the government in 1969, was dismissed in 1981, a consent decree harking back to 1956 is still partly in force. The decree, the final piece of which is due to expire in July, limits IBM's freedom to exploit its dominance of the server market.
An IBM AS/400 spokesman who asked to remain anonymous said the consent decree's expiration is just "business as usual." It has no impact on the company or its customers, he added.
But had it not been for the consent decree, things certainly would have been different, users and analysts said.
Imagine a world in which Bill Gates is just a senior software programmer and Larry Ellison a motivational speaker. In fact, there would be no EMC Corp., no Cisco Systems Inc. and no Sun Microsystems Inc. were it not for the decree, said Richard DeLamarter, an economist who worked for eight years with the U.S. Department of Justice (DOJ) on the antitrust case against IBM and later wrote the book Big Blue: IBM's Use and Abuse of Power.
Microsoft's ongoing legal drama has eerily replayed IBM's, said DeLamarter. Even some of the principal players have reappeared, including attorney David Boies, who once represented IBM but is now on the other side of the table, working for the prosecution.
Regardless of the outcome, the Microsoft suit, like the IBM case, has "already changed the dynamics of the industry," said DeLamarter.
For instance, it has kept Microsoft from crushing the upstart Linux movement, and Microsoft's rivals seem to have a better idea of how to compete against the company, he said. Microsoft refused to comment for this story.
As the World Turns
The world has changed quite a bit since IBM first came under attack. The mainframe has become a diminishing force in the industry due to flat profits and ferocious competition from high-powered, cheaper Unix boxes from Sun and other rivals.
According to a DOJ filing in 1996, "no IBM customer, and very few of IBM's competitors, voiced concern that decree termination would enable IBM to exercise any significant degree of market power. . . . In fact, many customers felt they had leverage over IBM."