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Justice Blocks Anti-competitive Computer Marketing

Government lawyers announce settlement with IBM, StorageTek

By Terry Frieden/CNN

WASHINGTON (Dec. 19) -- The Justice Department announced late Thursday that IBM and another computer technology firm have reached a settlement with the government to halt an anti-competitive marketing practice.

Justice Department officials said the anti-competitive arrangement between the two firms established IBM as the exclusive distributor for Storage Technology Corporation's mainframe disk storage products.

Officials say the 1996 deal struck by the two companies ended competition between the firms in the multi-billion dollar market for mainframe computer disk storage subsystems. Those systems store and provide ultra-fast access to data.

Justice's antitrust division said purchasers of mainframe disk storage had benefitted from the competition before the two firms struck an agreement. After the deal, price declines slowed.

IBM, based in Armonk, N.Y., and StorageTek, based in Louisville, Colo., are two of four firms in the world which produce disk and tape storage systems for mainframe computers.

In its lawsuit the government took aim at the portion of the agreement that imposed substantial financial penalties on StorageTek if it sold its systems to anyone other than IBM. The deal also imposed penalties on IBM if it did not buy enough of the products from StorageTek. The proposed settlement prohibits such practices. It also calls for limits on the amount of products Storagetek may sell to IBM until it has begun making substantial sales to customers other than IBM.

Assistant Attorney General Joel Klein said, "Vigorous competition is what drives the significant technical improvements and price reductions that we have seen in these products in recent years, and we won't tolerate private arrangements that slow such advances."

The announcement comes less than 24 hours after Klein announced the Justice Department's busy antitrust division would file civil contempt charges against Microsoft for violating a federal judge's injunction.


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Friday Dec. 19, 1997

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Justice Blocks Anti-competitive Computer Marketing





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