Under The Microscope

Dec. 21, 2004

Trading exchanges, like any joint-venture activity, have the potential to raise antitrust issues.

The potential of online trading exchanges has not only set the B2B world abuzz, it has attracted the attention of federal regulators as well. Since both buying- and selling-based trading exchanges will provide competitors the opportunity to collaborate, they have the potential to impair competition. Covisint, the new automotive industry exchange, for example, is being investigated by the FTC, confirms Howard Shapiro, senior public affairs representative at the agency, although he is mum on the nature of the inquiry. The basic issues of FTC antitrust scrutiny involve sharing of information, ramifications of joint buying or selling, and membership and participation as they affect options of doing business. These issues and others were discussed at an FTC-hosted workshop in Washington at the end of June. Some specific questions being asked include:

What mechanisms are included to prevent inappropriate sharing of competitive, confidential information on things like pricing, capacity, and trading patterns?

What opportunities exist for collusion, in particular price fixing or signaling, among competitors of significant market power?

Might exchanges take the form of exclusive arrangements that freeze out would-be competitors? "These are all complicated issues," says Susan DeSanti, the FTC's director, policy planning. "But if we learned one thing at our B2B workshop, it is that there are a lot of different business models for the e-business marketplaces. Some of them may raise antitrust issues, some may not. So you cannot talk about it as a global concern about trading marketplaces." Her advice for corporations thinking about participating in a trading exchange? "Just as with any joint venture you should check with antitrust counsel. Are there potential antitrust issues? Yes, but it depends on how the trading exchange is structured. It is very much a case-by-case basis."