The Supreme Court yesterday cleared the way for a jury trial of charges that International Business Machines Corp. had monopolized or tried to monopolize the computer-leasing market.
The justices declined an IBM petition to review an August decision by of a directed verdict for IBM, the appeals in an antitrust suit brought by Greyhound Computer Corp., IBM's larger single leasing competitor.
Overturning a federal judge's grant of a directed verdict for IBM, the appellate court said there was "evidence from which the jury could reasonably infer that IBM possessed monopoly power in the leasing of general-purpose commercial computers."
The opinion cited evidence, that IBM had the ability "to manage its prices with little regard to competition," that IBM based its prices on a 30 per cent profit objective, and that IBM impaired competition with practices that appeared on their face to be anticompetitive.
The appellate court also noted the answer given by IBM president Thomas J. Watson Jr. when he was asked if his company "ever set a price simply by meeting a competitor's price?" "Never," Watson replied.
In a brief to the Supreme Court, IBM -- a colossus with net income exceeding $100 million a week -- said that, if not reversed, the appeals court's "wrong" judgment "condemns competition." It empowers an antitrust jury to define "almost anything" as a relevant sub-market and to find "virtually any honest, lawful practice 'unnecessary' and hence a source of liability," IBM charged.
"Surely the effect of such a decision is to spawn litigation by those unsuccessful in the competitive market-place; to impel successful companies to 'soften' their competitive activities so as to avoid the expense and penalties of such litigation, and hence to suppress that 'free and unfettered competition' which the Sherman Act was enacted to protect and encourage," IBM argued.
Greyhound contended, however, that IBM showed the "classical indicia of a monopolist". The firm cited IBM's control of "95 per cent of all of the profits from the computer manufacturing industry" and a share of lease revenyes that "has traditionally exceeded 80 per cent of the total industry."
Greyhound also cited testimony by data-processing customers that they had decreased their equipment rental costs by between 10 and 20 per cent by leasing IBM equipment from Greyhound rather than from IBM.
The Greyhound suit is one of 19 private antitrust complaints filed against IBM since the government brought civil monopolization case against it 9 years ago. Trial of the government case began in May 1975 but remains years away from completion.
Greyhound says its suit is rooted in an earlier Justice Department complaint against IBM that was settled in the 1950s with a decree in which the company consented to stop only leasing its data-processing equipment.