U.S. Will Not Oppose I.B.M. In Trimming of Most Barriers

The New York Times

July 20, 1995

The Justice Department said yesterday that it would not oppose most elements of an I.B.M. petition to end Federal antitrust restrictions dating from 1956.

But the department, in a filing with a Federal judge, indicated that it was not yet willing to remove the restrictions as they apply to I.B.M.'s mainframe and minicomputer product lines.

The boundaries, set down in a court-approved antitrust settlement 39 years ago, require I.B.M. to sell computer services through an entirely separate business from its computer manufacturing and sales operations. The decree also forced I.B.M. to sell equipment to other computer concerns that had previously only rented, which put its competitors at a disadvantage in offering data processing and other computer services to their own customers.

The International Business Machines Corporation has asked United States District Judge Allen Schwartz in Manhattan to lift the restrictions. The company argues that the computer industry has changed substantially in the last four decades and that the restrictions keep it from competing effectively in the global market.

Yesterday's filing by the Justice Department was the Government's preliminary response in a proceeding that is likely to extend for several more months.

"It's a relatively early stage in the proceeding," said David Turetsky, senior counsel to Anne K. Bingaman, who heads the Justice Department's antitrust division.

The 1956 antitrust settlement, called a consent decree, was intended to resolve Justice Department charges that I.B.M. had tried to monopolize the computer industry, then in a fledgling stage.

The Justice Department's decision not to block most of I.B.M.'s motion to terminate the consent decree could make it easier for the computer giant to convince Judge Schwartz that the decree is archaic and unnecessary. The department said it would not oppose lifting the restrictions for personal computers and work stations.

Separating I.B.M.'s service business from its manufacturing and sales operations helped to spawn the multibillion-dollar computer services industry, which today includes I.B.M. rivals like the Electronic Data Systems Corporation, which is a unit of the General Motors Corporation, the Computer Sciences Corporation and Andersen Consulting, a division of Arthur Andersen & Company.

Hundreds of computer service, leasing and consulting companies would like to see the decree remain intact, because they fear an unrestricted I.B.M. encroaching on their businesses. Their fears primarily involve the product lines -- the System 360 through 390 series of mainframes and the AS/400 family of minicomputers -- that Mr. Turetsky said the Justice Department still had concerns about.

I.B.M. officials said they had not yet seen the Justice Department filing and were not prepared to comment.

Shares of I.B.M. fell $5.75 yesterday, to $101.25, during the broad selloff of technology stocks.