Competition and trade law: Undertaking to Commission from Digital Equipment Corporation

United Kingdom
The Commission has decided not to pursue the case against Digital Equipment Corporation for breaches of competition law in return for an undertaking from Digital on its European policy regarding the supply and the pricing of software and hardware maintenance services for digital computer systems.

The Commission had alleged that Digital had 'abused its dominant position' by tying the supply of hardware and software services and by engaging in discriminatory practices. The Commission also alleged that Digital's distribution agreements in respect of computer services were anti-competitive and affected EU trade by limiting the customer base of Digital's distributors and excluding certain companies, including TPMs (third party maintenance companies) from Digital's distribution network.

In response, Digital undertook to do the following:-

  • Offer hardware maintenance services for Digital systems on a stand alone basis;

  • Implement a pricing policy for its software support service based on a single flat fee per essential processing unit.

This indicates that the Commission places importance on the separate availability of the hardware and software support services to maintain competition in these sectors. Digital is still allowed to offer a 'packaged product' of hardware and software services but to avoid a 'tying' accusation any discount for this product may only reflect the actual cost savings of providing the combined product.

Digital further undertook to:-

  • Offer discounts on the basis of objective and public criteria and to offer the same types of discount on individual services as for packages;

  • Not restrict distributors from distributing software updates and update subscription services and to select service distributors by objective criteria.

This is to ensure that no distributor is excluded from being an authorised distributor because it is also a TPM offering maintenance services for Digital systems and reflects the Commission's concerns over discrimination and predatory pricing.

The undertaking will expire on 1 January 2003. Digital has a right after 1 January 2000 to request the Commission to consider its modification or termination. In the meantime, it offers a useful framework of reference on Commission policy for the supply of after-sales services and products in competition with third parties.