Cisco Accused of Antitrust Behavior

Cisco Systems Inc. (Nasdaq: CSCO) finds itself part of an antitrust lawsuit, although the case isn't directly trying to address the vendor's dominant position in the overall switch and router market.

Instead, it has to do with Cisco allegedly making life tough for outside companies that want to provide service and maintenance to Cisco equipment and networks.

The suit, filed yesterday on behalf of services company Multiven Inc. , contends that after the warranty expires, only subscribers to Cisco's Smartnet maintenance service can receive software updates such as bug fixes. (See Multiven Sues Cisco.)

The result, the lawsuit claims, is that the latest IOS updates are only available through Cisco and certain partners, namely resellers "with which it does not significantly compete," as the 28-page complaint states.

Key to the argument is that there's supposedly no "reasonably interchangeable substitute" for Smartnet. Neither can customers simply rip out Cisco gear and make an easy switch to a competitor, the suit notes.

The suit was filed in San Jose District Court by Blecher & Collins, a law firm that's had some high-profile experience in this area.

"We did the same case a dozen years back against Eastman Kodak," attorney Maxwell Blecher, representing Multiven, tells Light Reading. Kodak was accused of refusing to sell certain parts to independent service organizations, a practice that U.S. courts eventually declared uncompetitive.

The Multiven complaint likewise points out an Avaya Inc. case where the District Court in New Jersey ruled that tying software updates to service contracts is an anti-competitive practice.

In the usual sweeping lingo of lawsuits, the complaint says Cisco sought to "eliminate, destroy, or foreclose meaningful competition" in services and maintenance while keeping its own maintenance prices relatively high. One key is that, according to the lawsuit, there's no technological reason for tying software upgrades to services contracts.

Multiven is asking for unspecified damages that would be tripled, per antitrust rules.

Cisco does intend to defend the suit, according to a written statement handed out to the media. "Cisco customers are in no way required to purchase services from Cisco," the statement reads, adding, "Cisco’s SMARTnet policies for servicing equipment are also consistent with industry practices for making bug fixes available."

— Craig Matsumoto, West Coast Editor, Light Reading

Kreskin 12/5/2012 | 3:25:58 PM
re: Cisco Accused of Antitrust Behavior
Xerox tried the same move back in the 80's ... they lost big time and the damages were significant.
Pete Baldwin 12/5/2012 | 3:25:57 PM
re: Cisco Accused of Antitrust Behavior Interesting. So it seems there's a handful of prior examples here.

Maybe they don't want to get dragged into anything involving lawyers, but I half expected Juniper to jump all over this. Because everybody gets the same Junos updates quarter by quarter, bug fixes would go out to all customers universally, wouldn't they.
gotman 12/5/2012 | 3:25:55 PM
re: Cisco Accused of Antitrust Behavior You don't really expect J to jump on something like this publicly do you? C didn't do this to J 2 years back when they had to restate and what not... Business goes on.. Partners of C and J will make noises about it.
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