United States. Congress. Senate. Committee on the.

The Industrial reorganization act. Hearings, Ninety-third Congress, first session [-Ninety-fourth Congress, first session], on S. 1167 (Volume pt. 7) online

. (page 41 of 140)
Online LibraryUnited States. Congress. Senate. Committee on theThe Industrial reorganization act. Hearings, Ninety-third Congress, first session [-Ninety-fourth Congress, first session], on S. 1167 (Volume pt. 7) → online text (page 41 of 140)
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into such arrangements that are reasonably necessary to enable Small EDP Sys-
tems Company to effectively compete in the relevant markets in which it will be
engaged during the period following its incorporation.

(c) IBM is hereby ordered and directed to divest itself of all of the shares of
capital stock of Small EDP Systems Company by distributing such shares to the
stockholders of IBM. The said divestiture (together with everything else herein-
before provided by this Article IX) shall be completed by not later than one year
from the date of this Final Judgment.

(d) Those of the directors, officers and employees in an executive capacity of
IBM whose names are specified on Schedule A are ordered and directed, upon
receipt by them of any shares of the capital stock of Small EDP Systems Com-
pany, pursuant to the aforementioned divestiture, to promptly divest themselves
of all such shares and are enjoined and restrained from owning, directly or in-
directly, at any time, any shares of the capital stock of Small EDP Systems
Company.

(e) IBM Group is enjoined and restrained from acquiring, directly or indirectly,
any capital stock of Small EDP Systems Company.

(f) IBM Group is enjoined and restrained from employing, directly or in-
directly, an officer or employee in an executive capacity or permitting to serve
on its board of directors any person who at any time has served as a director,
officer or employee in an executive capacity of Small EDP Systems Company.

(g) Small EDP Systems Company is enjoined and restrained from employing,
directly or indirectly, an officer or employee in an executive capacity or permit-
ting to serve on its board of directors any person who at any time has served as a
director, officer or employee in an executive capacity of IBM Group.



5307



During the period of ten years to follow the date of entry of this Final Judg-
ment and such period thereafter in which the share of Small EDP Systems Com-
pany of the Small EDP System Submarket exceeds thirty-five percent, Small EDP
Systems Company is enjoined and restrained from engaging, directly or indi-
rectly, in the manufacture, sale or lease of Large EDP Systems.

XI

During the period of ten years to follow the date of entry of this Final Judg-
ment and such period thereafter in which the share of Small EDP Systems Com-
pany of the Small EDP System Submarket exceeds thirty-five percent, Small EDP
Systems Company is enjoined and restrained from engaging, directly or indi-
rectly, in the manufacture, sale or lease of Communications Equipment (except
Terminals) .

XII

During the period of ten years after the date of entry of this Final Judgment
and such period thereafter in which the share of Small EDP Systems Company
of the Small EDP System Submarket exceeds thirty-five percent. Small EDP
Systems Company is enjoined and restrained from engaging, directly or indi-
rectly, in the manufacture, sale, lease or furnishing of products or services of
the type made or furnished by Components Company, Office Products Company or
Service Bureau Company.

XIII

Small EDP Systems Company is hereby ordered and directed to reduce its
share of the Small EDP System Submarket to fifty percent or less within five
years and thirty-five percent or less within ten years from the date of entry of
this Final Judgment ; jurisdiction is retained by this Court for the purpose of
providing further appropriate structural and behavioral relief against Small EDP
Systems Company in the event it fails to so reduce its share of said Submarket.

XIV

IBM Group shall retain, under and subject to the jurisdiction and supervision
of this Court, all assets which it is not required to divest by Articles III, V, VII
and IX, and IBM Group is hereby ordered and directed to reduce its share of the
Large EDP System Submarket to fifty percent or less within five years and
thirty-five percent or less mthin ten years from the date of entry of this Final
Judgment ; jurisdiction is retained by this Court for the purpose of providing
further appropriate structural and behavioral relief against IBM Group in the
event it fails to so reduce its share of said Submarket.

XV

During the period of ten years after the date of entry of this Final Judgment
and such period thereafter in which the share of IBM Group of the Large EDP
System Submarket exceeds thirty-five percent, IBM Group is enjoined and
restrained from engaging, directly or indirectly, in the manufacture, sale or
lease of Small EDP Systems.

XVI

During the period of ten years after the date of entry of this Final Judgment
and such period thereafter in which the share of IBM Group in the Large EDP
System Submarket exceeds thirty-five percent, IBM Group is enjoined and re-
strained from engaging, directly or indirectly, in the manufacture, sale or lease
of Communications Equipment.

XVII

During the period of ten years after the date of entry of this Final Judgment
and such period thereafter in which the share of IBM Group in the Large EDP
System Submarket exceeds thirty-five percent. IBM Group is enjoined and re-
strained from engaging, directly or indirectly, in the manufacture, sale, lease or
furnishing of products or services of the type made or furnished by Service
Bureau Company. Components Company and Office Products Company.



5308



XVIII



Each of Service Bureau Company, Components Company and Oflace Products
Company is enjoined and restrained from purchasing, leasing or otherwise obtain-
ing, within any year of the ten-year period after the date of entry of this Final
Judgment, more' than thirty-five percent of its requirements for EDP Systems or
EDP Equipment from IBM Group or SmoU EDP Systems Company.

XIX

(a) IBM Group and Small EDP Systems Company are hereby ordered and
directed within 12 months from the date of entry of this Final Judgment to pro-
duce a type of connection to effectively and fully utilize the EDP Systems of
IBM Group and Small EDP Systems Company with Communications Equip-
ment designed or produced by Persons engaged in the design, research, develop-
ment, production, sale or lease of EDP Systems, EDP Equipment, Communica-
tions Equipment, Terminals or Software.

(b) Small EDP Systems Company is hereby ordered and directed within 12
months from the date of entry of this Final Judgment to produce various types
of connections to effectively and fully utilize the EDP Systems of IBM Group
and other Persons engaged in the design, research, development, production, sale
and lease of EDP Systems with the Terminals of Small EDP Systems Company.

(c) Unless the consent of this Court is first obtained, during the period of ten
years to commence on the date of entry of this Final Judgment, IBM Group and
Small EDP Systems Company are enjoined and restrained from making any
changes in or modification of the connections to which reference is made in Sec-
tions (a) and (b) of this Article XIX.

XX

(a) During the period of ten years to commence with the date of entry of this
Final Judgment and such period thereafter in which the share of IBM Group in
the large EDP System Submarket exceeds thirty-five percent, IBM Group is
ordered and directed to make disclosures as provided by Section (c) of this
Article XX. The disclosures with respect to procedures and techniques that may
be utilized with hardware. Software or combinations thereof (sometimes referred
to as "firmware") to define the operations of each aspect of any new "computer
language" incorporated in the applicable Software, shall be made at least 60
months prior to such time that such procedures and techniques are made avail-
able. All other disclosures shall be made at least 24 months prior to such time
that IBM Group makes available by sale, lease, license or otherwise, any new
product, device, procedure related to any such product or device, or any modifica-
tions of any products, devices or procedures.

(b) During the period of ten years to commence with the date of entry of this
Final Judgment and such period thereafter in which the share of Small EDP
Systems Company in the Small EDP System Submarket exceeds thirty-five per-
cent. Small EDP Systems Company is ordered and directed to make disclosures
as provided by Section (c) of this Article XX. The disclosures with respect to
procedures and techniques that may be utilized with hardware. Software or com-
binations thereof (sometimes referred to as "firmware"), to define the opera-
tions of each aspect of any new "computer language" incorixtrated in the ap-
plicable Software, shall be made at least 60 months prior to such time that such
procedures and techniques are made available. All other disclosures shall be
made at least 24 months prior to such time that Small EDP Systems Company
makes available by sale, lease, license, or otherwise, any new product, device,
procedure related to any such product or device, or any modifications of any
products, devices or procedures.

(c) The disclosures provided by this Article XX shall be made to all Persons
engaged in the research, design, development, production and lease of EDP
Systems, EDP Equipment, Communications Equipment, Terminals and Soft-
ware and shall consist of (i) comprehensive written materials to be delivered
to all such Persons and (ii) assistance to be rendered at reasonable times to
all such Persons by qualified employees of IBM Group or Small EDP Systems
Company, as the case may be, which would provide to persons trained in the
applicable arts adequate information to enable them to effectively and fully
utilize the EDP Systems, EDP Equipment, Communications Equipment and
Software of the aforementioned Persons with all EDP Systems, EDP Equip-



5309

meat. Communications Equipment, Software and other products, devices, serv-
ices and procedures which are sold, leased, licensed or otherwise made available
bv IBM Group and Small EDP Systems Company, respectively. The disclosures
uiust include, by way of example and not by way of limitation, ( i ) data regard-
ing- dimensions, recording density, track spacing, record identification and other
descriptive data with resi>ect to discs, tapes, cards and other ]nedia products ;
(ii) procedures and techniques that may be utilized with respect to hardware,
Software or combinations thereof (sometimes referred to as "firmware"'), to
define the operations of each aspect of the "computer language" incorporated
in the applicable Software; (iii) physical and logical data formats, control
routines and data codes, with respect to communications; and (iv) job control,
formats and procedures with respect to the human/EDP System dialogue
required to oi>erate such system effectively.

XXI

(a) During the period of ten years to commence with the date of entry of
this Final .Tudgment and such period thereafter in which the share of IBM
Group in the Large EDP System Submarket exceeds thirty-five percent. IBM
Group is ordered and directed to make disclosures as provided by Section (c)
of this Article XXI.

(b) During the period of ten years to commence with the date of entry of
this Final Judgment and such period thereafter in which the share of Small
EDP Systems Company in the Small EDP System Submarket exceeds thirty-five
percent, Small EDP Systems Company is ordered and directed to make dis-
closures as provided by Section (c) of this Article XXI.

(c) The disclosures provided by this Article XXI shall l)e made to all Persons
engaged in the manufacture of EDP Systems and shall consist of (i) comprehen-
s;ive written materials to be delivered to all such Persons, and (ii) assistance to
be rendered at reasonable time to all such Persons by qualified employees of
IBM Group or Small EDP Systems Company, as the case may be, which disclose
all of the Applications Software, together with all modifications and improve-
ments made to said Applications Software from time to time, which is owned
liy IB^I Group or Small EDP Systems Company, as the case may be, or other-
wise in the possession of either such company with attendant rights to sub-
license and which is utilized with EDP Systems. EDP Equipment. Communi-
cations Equipment and Terminals manufactured, sold or leased by IBM Group
or Small EDP Systems Company, as the case may be. Such disclosures shall
be made without the payment of any consideration whatsoever to IBM Group
and Small EDP Systems Company, and shall include, but not be limited to,
functional specifications explaining the manner in which such aforementioned
Applications Software interconnects and works with Operating Software, Func-
tional Utility Software, Firmware and other Applications Software.

(d) During the periods provided in Sections (a)) and (b) above of this
Article XXI, IBM Group and Small EDP Systems Company are ordered and
directed to produce all future Applications Software in the computer language
known as COBOL or a comparable standardized high-level computer language
approved by this Court and in a form which is most generally compatible with
and operational on EDP Systems manufactured by other Persons. Such Applica-
tions Software shall conform to any product standards which have been adopted
for that type of application and/or language by American National Standards
Institute or by other recognized electronic data processing industry standards
groups approved by this Court and IBM Group and Small EDP Systems Company
shall refrain from writing any portion of such Applications Software in language
deviating from that six»cified in said product standards unless prior approval
of this Court is obtained for deviations on good cause shown. Said product
standards to be conformed to by IBM Group and Small EDP Systems Company
pursuant to this Article XXI shall include, but not be limited to, standards for
file structures, data communications, message formats, and job control formats
and procedures with resi>ect to the human/EDP system dialogue, wherever
possible.

(e) All Applications Software now owned or otherwise possessed with rights
to sublicense by IBIM Group or Small EDP Systems Company and all such
Applications Software which during the ten-year period following the date
of entry of this Final Judgment is produced, owned or otherwise comes into
the possession of IBM Group or Small EDP Systems Company with rights to
sublicense shall be reproduced and furnished in the form specified above in

40-927—75 31



5310

Section (d) of this Ai-ticle XXI upon request to all Persons ayIio manufacture
EDP Systems, at no charge and with full rights for said Persons to use, resell
or otherwise sublicense the use of such Applications Software.

(f ) IBM Group ahd Small EDP Systems Company are ordered and directed
to provide to all Persons who have obtained Applications Software pursuant
to Section (e) above of this Article XXI all written materials and other assist-
ance which may be necessary to make error connections in or improvements and
modifications to any Applications Software furnished said Persons for a period
of at least five years from the date of each item of such Applications Software
was initially made available by IBM or Small EDP Systems Company for sale,
lease or license to end-users and, subject to the foregoing, to notify all Persons
receiving Applications Software pursuant to Section (e) above of this Article
XXI of its intention to discontinue such error correction and program modifi-
cation and improvement support for any poi'tion of such Applications Software
at least two years prior to the effective date of such discontinuance.

(g) If any Applications Software furnished to any Pei'sou pursuant to this
Article XXI requires special implementation on or with EDP Equipment. Ter-
minals or other devices manufactured liy either IBM Group or Small EDP
Systems Company in order to effectively utilize its capabilities, then and in that
event IBM Group and Small EDP Systems Comi>any are ordered and directed to
sell or otherwise make available such EDP Systems, Terminals and devices to
such Persons under the provisions; for OEM purchasing specified in Article XXII
of this Final Judgment.

xxn

IBM Group and Small EDP Systems Company are hereby ordered and
directed, for a period of ten years from the date of entry of this Final Judgment
and such period thereafter in which their respective shares in the Large EDP
System and Small EDP System Submarkets exceed thirty-five percent, to
announce and make available for sale to all manufacturers of EDP Systems,
at a time no later than the corresponding related commercial announcement,
reasonable portion assembly or subassembly of any of its EDP Equipment at
prices to be designated as original equipment manufacturer (OEM) prices
and calculated as follows : 2X the sum of projected factory, direct labor, burden
and materials costs for each such tyiie of EDP Equipment. IBM Group and
Small EDP Systems Company shall manufacture and/or ship such devices
ordered by other manufacturers of EDP Systems in the order in which such
purchase orders are received, regularly intermingling them with purchase from
all other customers.

XXIII

Office Products Company is hereby ordered and directed, for a period of ten
years from date of entry of this Final Judgment, to announce and make available
for sale to all manufacturers of EDP Systems, at a time no later than the
corresponding related commercial announcement, reasonable portion assembly
or subassembly of any of its office product equipment at prices to be designated
as original equipment manufacturers (OEM) prices and calculated as follows:
2X the sum of projected factory, direct labor, burden and materials costs for
each such type of office products equipment.

Office Products Company shall manufacturer and/or ship such devices ordered
in the order in which such purchase orders are received, regularly inter-
mingling them with purchase orders from all other customers.

XXIV

Within thirty days after each calendar quarter included in the period of ten
years to commence with the date of entry of this Final Judgment. IBM and
Small EDP Systems Company shall submit to the Antitrust Division of the
United States Department of Justice a written report of their respective (i)
total sales and revenues, and (ii) income (or loss) before income taxes segre-
gated between U.S. and other, and extraordinary items attributable to each of
the following :

(a ) each of their respective product lines

(b) each of their respective lines of business

The said sales, revenues and income (or loss) figures shall be shown separately
for each product line and each line of business for both the U.S. and other.



• 5311

If there is in effect, at the time auy such report is so required to be subuiitted
to the Antitrust Division, a requirement that a corporation filing a registration
statement or a report witli the United States Securities and Exchange Commission
report separate sales, revenue and income (or loss) figures for each <if its
product lines and for each of its lines of business, then, in that event, the
definitions of product line and line of business utilized for that purpose shall
be utilized in determining the product lines and lines of business concerning
which IBM is to file its aforementioned reports with the Antitrust Division.
The Antitrust Division shall give a copy of each such report, submitted to it
by IBM and Small EDF Systems Company to each Person engaged in producing,
selling or leasing any EDP System, EDF E(iuipnient or Software who makes a
request for such report.

XXV

(a) IBM and Small EDP Systems Company are hereby respectively enjoined
and restrained from permitting any Person who is a director, officer or employee
in an executive capacity of any other Person which is its supplier, customer or
significant competitor to serve as a director on its board or as its officer or
employee in an executive capacity. No officer or employee in an executive
capacity of IBM or Small EDP Systems Company shall be a director, officer or
employee in an executive capacity of any other Person.

(b) No director of IBM or Small EDP Systems Company shall influence the
selection by any Person of EDP Equipment manufactured by IBM or Small
EDP Systems Companv respectively.

XXVI

IB^I and Small EDP Systems Company are respectively enjoined and re-
strained from offering, directly or indirectly, to make available any price,
discount, rebate, or other concession or incentive to any Person who is awaiting
the delivery or the completion of installation of any equipment, product, or
service produced, furnished or leased by IBM or Small EDP Systems Company
as an inducement to such user to acquire, lease or otherwise obtain from IP.^M
or Small EDI' Systems Comi)any, any EDP System, EDP Equipment or Software.

XXVII

IBM and Small EDP Systems Company are respectively enjoined and re-
strained from offering, directly or indirectly, to any Person (i) prices which are
lower than tliose offered to its other customers, (ii) any allowance, discount,
rebate or other concession of any kind whatsoever not offered generally to all
of its customers, (iii) any "free usage" of EDP Systems or EDP Equipment, or
(iv) to negotiate, for any purpose, "buy-back" of EDP Systems or EDP Equip-
ment use time.

XXVIII

IBM and Small EDP Systems Company are respectively enjoined and re-
strained from directly or indirectly entering into, adhering to, enforcing or
claiming any rights under any term or provision of any contract, agreement,
or understanding between or among its actual or potential competitors, which
term or provision or understanding :

(1) Allocates territories, customers or markets ; or

(2) Establishes prices or terms for tlie manufacture. u.se, sale or lease of
any EDP System. EDP Equipment or Software, other than purchase, sale
or lease transactions between competitors in the normal course of busines.s.

XXIX

IBM and Small EDP Systems Company are respectively ordered and directed
to make new products, or products under new names, fully available on non-
discriminatory terms to all customers of the same general category located in
the United States ; provided, however, that such customers must comply with
IBM's and Small EDP Systems Company's reasonable and uniform standards of
credit.

XXX

IBM and Small EDP Systems Company are respectively enjoined and restrained
from directly or indirectly :

(a) Making any (i) advertisement or announcement concerning a proposed
new item of Software. EDP System or EDP Equipment prior to such time that



5312

if- has available a tested working model of the EDP System or EDP Equipment or
"the Software has been completed and available for delivery to at least one
•cnstomei*, or (ii) other premature advertisement or announcement of any new
Software, EDP System or EDP Equipment, the consequence of which v/ould be to
^deter the acquisition of Software, EDP System or EDP Equipment from any
Person other than IBM or Small EDP Systems Company respectively.

(b) Imposing on its marketing or other personnel quotas, penalties (financial
or otherwise) or "charge-backs" based on either a netting or a loss of orders,
customers, or bookings, the consequence of which may be to encourage such
I>ersonnel to engage in predatory or unfair trade practices ;

(c) Utilizing any marketing incentive program under which (i) more than ten
percent of the total compensation of an employee is based on the sales or leases
generated by his efforts or (ii) the compensation of an employee is reduced or
'-'netted" by reason of the return by a customer of equipment previously sold,
delivered or installed ;

(d) Offering to sell, lease or deliver Software, new or used EDP Systems or
EDP Equipment to an educational institution at prices or rental less than those
offered to other customers ;

(e) Selling or leasing further Software, EDP Systems or EDP Equipment to
any educational institution whose aggregation of such equipment is more than
50% of IBM or Small EDP Systems Company manufacture and which is receiving,
directly or indirectly, any grant, loan or other support from IBM or Small EDP
Systems Company respectively.

* (f) Offering to sell, lease, license or deliver Software, EDP Systems or EDP
Equipment to any educational institution whose aggregation of such equipment
is more than ;■"•((% of IBM or Small EDP Systems Company manufacture and
which is receiving, directly or indirectly, any funds from the United States Gov-
ernment, or any agency or department thereof, by reason of the use of such
Software, EDP Systems or EDP Equipment for training or other educational



Online LibraryUnited States. Congress. Senate. Committee on theThe Industrial reorganization act. Hearings, Ninety-third Congress, first session [-Ninety-fourth Congress, first session], on S. 1167 (Volume pt. 7) → online text (page 41 of 140)