Covisint Gets FTC Nod

Last month the Federal Trade Commission closed its initial investigation of Covisint, the automotive e-business trading exchange, but reserved the right to scrutinize the exchange further if events warrant. In issuing its statement, the FTC was quick to point out that Covisint is in the early stages of its development, and has yet to adopt bylaws, operating rules, or terms of participant access. And because Covisint is not yet operational, the FTC cannot say that implementation of the trading exchange will not cause antitrust concerns in the future. "The Commission reserves the right to take such further action as public interest may require," says FTC Secretary Donald S. Clark. Covisint is the first such exchange to come under FTC scrutiny. The investigation was triggered when Covisint filed under the Hart-Scott-Rodino (HSR) Antitrust Improvements Act in June, to see if the proposed entity violated section 7 of the Clayton Act. HSR is designed for review of certain proposed mergers and allows antitrust authorities to look at transactions before they are completed. In effect a large joint venture, Covisint is being formed by auto-makers Ford Motor Co., General Motors Corp., DaimlerChrysler AG, Renault SA, Nissan Motor Co. Ltd., and Covisint technology partners Commerce One Inc. and Oracle Corp. to assist in product design, supply-chain management, and procurement functions. HSR requires filing with the FTC or the U.S. Justice Dept. but does not specify the issues subject to review. The FTC does not comment on the specifics of any of its investigations, according to Susan DeSanti, director, policy planning, FTC. In general "the review covers issues of information exchange, monopoly, exclusion, and exclusivity," she says. Questions addressed in the Covisint review might have included:

Are mechanisms in place to prevent inappropriate sharing of information with regard to pricing, trading patterns, and capacity?

Are there opportunities for collusion, in particular price fixing, among competitors of significant market power?

Does a participant in the automotive industry have to be a member of Covisint to compete effectively in the industry? Closing of the investigation was hailed by Covisint management as opening the way for the business-to-business (B2B) trading exchange to take its next steps toward becoming operational. "The completion of the FTC review represents a significant milestone in our efforts to establish a transformational business-to-business entity," says Alice Miller, spokesperson for the Covisint Executive Planning Team, which has its temporary headquarters in Southfield, Mich. Favorable review of Covisint does not necessarily clear the way for similar results from investigation of other trading exchanges. "Antitrust analysis of an individual B2B exchange will be specific to its mission, its structure, its particular market circumstances, procedures, and rules for organization and operation, and actual operations and market performance," according to the FTC. In other words, each exchange will be examined on a case-by-case basis.