According to an article in Tietoviikko magazine, Tieto Oyj (OMXH: TIE1V, OMXS: TIEN) has complained to Finnish Market Court on Finnish Social Insurance Institution Kela’s acquisition decision on maintenance of its enterprise data centre mainframe IBM “System z10”. Kela has previously handled the maintenance of its computer systems internally, but feels it is exceedingly difficult to keep doing so. After a public procurement process Kela decided to order the maintenance from IBM Corporation, the maker of the mainframe computer.
Tieto now complains to Market Court against said decision. Tieto’s offer was nearly 50% more expensive than the winning bid by IBM according to Kela’s calculations. Tieto had requested information from IBM on the license fees and equipment rental required to perform the machine maintenance and said that IBM’s offer represented up to 80% of the costs that Tieto would have incurred had it won the project, meaning it would have been making a loss if it bid the same amount as IBM did.
In October 2010 The European Commission initiated formal antitrust investigations against IBM related to the abuse of a dominant market position in mainframe computers market. The second of the cases that was under investigation at that point was about alleged discriminatory behaviour towards competing suppliers of mainframe maintenance services. Upon receiving an offer from IBM to settle the matter towards the end of 2010, EU commission made the offer terms legally binding. IBM committed to making spare parts & technical information swiftly available to other maintenance providers under “commercially reasonable and non-discriminatory terms”.
Tieto now asks for price information in IBM’s offer used for comparison in Kela’s calculations and asks the procurement decision to be overturned. Of course what is commercially reasonable is also commercially reasonable when offering to an end-customer. Thus IBM would be able to bid somewhat lower all things being equal. One can also naturally easily think of reasons why Tieto would be interested in the information it now asks. However, should the entire large difference in offers come from the license fees & equipment rental costs, commercially viable may be debatable.
Acquisitions decisions of Finnish State and municipal authorities and other contracting authorities with value above pre-determined (national and EU directive) thresholds are based on Finnish law on public procurement. The decisions are subject to mandatory publication rules. The Market Court may overturn public procurement decisions, adjust the process or order compensatory payments. EU Commission could impose a fine of up to 10 per cent of IBM's total turnover without having to prove a violation of EU competition rules, should IBM be in breach its commitments.
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