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Is SCO in Violation of the UK's Competition Act?
Monday, November 10 2003 @ 05:33 PM EST

A Groklaw reader has informed us that he has today emailed the UK Office of Fair Trading inquiring as to whether SCO has violated the UK's Competition Act of 1998, which is explained like this:

"The Competition Act 1998 is designed to make sure that businesses compete on a level footing by outlawing certain types of anti-competitive behaviour. The OFT has strong powers to investigate businesses suspected of breaching the Act and to impose tough penalties on those that do.

"All businesses, no matter how small, need to know about the Act - to avoid becoming a victim, and to avoid breaking the law.

"The Act should not be viewed in isolation. The Enterprise Act 2002 among other things introduces a cartel offence under which individuals who dishonestly take part in the most serious types of anti-competitive agreements may be criminally prosecuted.

"In addition, as a result of amendments to the Company Directors Disqualification Act 1986 under the Enterprise Act 2002, company directors whose companies breach competition law (including the prohibitions in the Act) may be subject to Competition Disqualification Orders, which will prevent them from being concerned in the management of a company for a maximum of 15 years."

You can read more about the referenced Enterprise Act, which is the law regarding unfair competition and misleading advertising and which is enforced by the Competition Commission. I have no knowledge of UK law, so read on at your own risk and verify everything with your attorney, if you decide to do something similar. Here is the email he sent the Office of Fair Trading:

"The subject of my enquiry is The SCO Group, whose UK office is at Titan Court, 3 Bishop Square, Hatfield, Herts, AL10 9NA.

"We are a small company that since its inception in 1986 has worked in the area of the UNIX operating system. In more recent years we have developed and sold software for the Linux operating system.

"UNIX was originally developed by Bell Laboratories in the USA, then it was sold to Novell, then to the Santa Cruz Operation, and then to Caldera, who now call themselves the SCO group.

"Linux, as you may know, was developed and is distributed under an 'Open Source' policy. This means that the whole of it, including the source code is in the public domain and can be obtained for minimal cost.

"In recent months, SCO has been engaged in a campaign to discredit Linux, which is clearly displacing much of the return on the investment they have made in UNIX, by saying that Linux is an 'unauthorised derivative of UNIX'. I have attended presentations at which SCO have explicitly said that as a fact without qualifying it as 'we allege that...', as well as reading it on their website at

"SCO have said that all commercial users of Linux will have to pay them a licence fee for use of Linux. The above-mentioned web page gives details. . . .

"I am aware that there are lawsuits pending in the US Federal Courts in Utah and Delaware against IBM and Red Hat respectively over many of these issues. However, with due respect to those courts, they are not the fastest-moving institutions in the world, a hearing not being expected before the middle of 2005, and in the meantime damage is being done to companies such as mine who have chosen to make their business with Linux software and services by putting 'Fear Uncertainty and Doubt' in the minds of potential customers over the legality of the software being used.

"I would draw your attention to the fact that the German courts have prevented SCO from making these allegations in Germany and have imposed a fine of 10,000 on SCO for breach of an injunction to stop doing so. However that only applies to Germany.

"A situation where a company might threaten to invoice (and they have clearly stated that they would back it up with litigation) another company's customers on the basis of totally unsupported allegations of copyright infringement by the second company is surely without precedent.

"I should therefore be grateful if you would investigate whether SCO's activities in this matter constitute unfair competition as proscribed by the Competition Act."

Here is part of what is prohibited under the Act:

"The prohibition

"Agreements etc. preventing, restricting or distorting competition.

"2. - (1) Subject to section 3, agreements between undertakings, decisions by associations of undertakings or concerted practices which-

"(a) may affect trade within the United Kingdom, and
"(b) have as their object or effect the prevention, restriction or distortion of competition within the United Kingdom,
"are prohibited unless they are exempt in accordance with the provisions of this Part."

You can find more websites that carry information about the Enterprise Act of 2002 here. One thing I notice is that any false information provided can be sanctionable against the one reporting it, so proper wording would be important, and that, of course, is what lawyers are for.

Here is contact information for the Office of Fair Trading:

The Office of Fair Trading
Fleetbank House, 2-6 Salisbury Square, London EC4Y 8JX
Switchboard (020) 7211 8000
Web Site:

Our informant has agreed to keep Groklaw up-to-date on developments on his case. I know from my email and from comments that a lot of you have been wondering when someone might do something like this in the UK, and now you know.

UPDATE To keep my email manageable, this is to let you know I do know that Linux is licensed under the GPL, and it's not public domain. However, I am reporting on the email. It is what it is, and I can't change his email. It was sent already, before it arrived in my inbox. If you live in the UK and are positive you know what the expression "public domain" means legally in the UK, by all means write a more precise letter, if you wish. This person took the initiative, figured out a strategy, and wrote an email to get the ball rolling in the UK. To the best of my knowledge, he is the first to do so in that country. That is news that matters.

Another reader sends this information on the EU:

"The EU has laws about competition as well; they should be similar to those in the UK. There is an EU Commissioner specifically appointed to deal with competition matters, a post currently held by Mario Monti. The address listed on the competition website is:

European Commission
Directorate-General for Competition
B-1049 Brussels

"There is also a Consumer Affairs Commissioner too (David Byrne... no, not that one, another one). It looks like he may be more interested in unfair trading practices whereas the Competition Commissioner is concerned with market abuse and anti-trust stuff."

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