Reseller stays mum on settlement of IBM mainframe dispute

NSW mainframe dealer Riverstone Computer Services has ceased its fresh proceedings in the Federal Court of NSW against IBM and says it has been required to keep mum about any terms of the related settlement.

The mainframe dealer and broker initially filed a claim against Big Blue in early 2002, alleging that the latter had tried to over-restrict its trading of second-hand mainframes -- a move which had adversely affected the reseller's business and constituted a breach of the Trade Practices Act 1974.

Riverstone further alleged in proceedings begun this year that IBM had restricted the reseller's ability to trade so much that it had been forced out of that IBM second-hand mainframes business in 2000.

John Vardill, director at Riverstone, said today that the reseller had agreed to withdraw its claims. A directions hearing had been scheduled in the Federal Court of NSW for Tuesday 8 June.

"An agreement has been reached between the two of us and proceedings have been stopped. I can't make any further comment -- that's the official line from both sides," Vardill said.

IBM had required Riverstone to keep silent about any and all details of the case from now on, Vardill said. "I'd love to comment but I can't."

Matthew Garey, a solicitor at law firm Minter Ellison who had been working for Riverstone on the IBM case, said he was also unable to comment on the case or confirm any further details. That was part of the deal, Garey said.

A spokesperson for IBM Australia would not confirm nor deny whether IBM had made Riverstone's silence a condition of the settlement.

"There's a difference between supposition and fact," he said. "The agreement is a confidential agreement and that's not necessarily unusual. It is pretty common in larger actions that it's a confidential thing."

He suggested that the reseller might have asked for silence around the arrangement.

However, the only statement IBM would officially make was that the matter had been resolved by agreement and the proceedings discontinued, the spokesperson said.

Court orders filed on the initial hearing on 19 December 2002 reveal that Riverstone initially alleged IBM had changed its policies since it began buying and selling mainframes from and to IBM in 1991, including requiring all mainframes to not be resold outside a particular geographical area.

Riverstone had been forbidden to resell IBM mainframes to buyers in the US or the European Common Market, the court documents said.

"These being substantially the largest markets for second-hand mainframe computers in the world," they said.

However, the reseller had also been forbidden from selling IBM mainframes to Japan and China and 'at some time' even been forbidden from selling to buyers in Australia, the court documents said.

"The geographical restrictions appear to have varied," they said.

IBM had begun treating its own reseller as a competitor. Riverstone had claimed that IBM had started requiring written guarantees of the location of all sales and asked to see contracts between the reseller and its customers, the court documents alleged.

The vendor had also introduced a policy that any second-hand mainframes that competed with its new ones had to be destroyed, the court documents alleged.

Big Blue had acted to protect is own profits, the court documents alleged.

IBM's main competitors, including Hitachi Data Systems and Fujitsu trading arm Amdahl, had withdrawn from the market several months before IBM's actions allegedly pushed Riverstone out of the second-hand IBM mainframes game, the court documents said.

Since that time, resellers of IBM mainframes -- such as Riverstone -- had been Big Blue's only direct competition in that market, the court documents suggested.