BtoB

FTC guidelines provide little guidance

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No news is good news. That's the word from b-to-b watchers as the Federal Trade Commission late last month delivered a long-awaited analysis of e-marketplaces that is long on common sense and short on specific limits or restrictions.

The FTC staff report is the first formal guidance from the agency on how and when b-to-b marketplaces might give rise to antitrust concerns.

For most fledgling marketplaces, the study's release was a mere formality. Cautious b-to-b executives already run every major move they make past in-house counsel and pass along their business plans to the FTC for cursory review.

"The report is helpful, but it largely states the obvious: The FTC will be applying traditional antitrust principles in reviewing these b-to-b exchanges," said Hillard Sterling, partner with Chicago law firm Gordon & Glickson L.L.C., who closely tracks b-to-b legal issues. "The development of these exchanges will be tricky from design to execution. Antitrust lawyers will be closely involved every step of the way."

The only marketplace to receive an in-depth FTC review thus far is automobile marketplace Covisint. The FTC closed its investigation into Covisint in early September, saying the marketplace was still so early in its formation that it was not yet clear whether it would cause competitive concern. The FTC left the door open to revisiting Covisint, and other exchanges, as the industry develops.

"The FTC really just punted on the Covisint inquiry," Sterling said. "It's entirely possible they'll renew the inquiry once the exchange matures and new facts emerge. In traditional antitrust analysis, the devil is in the details."

An industry in motion

E-marketplace executives, facing an industry reshaping itself almost daily and a financial environment growing skeptical of the promise of b-to-b, say they are happy to see regulatory uncertainty put to rest, at least for now.

"It clears the way for the [industry marketplace] consortia to step forward in a careful way," said Phil Ring, president-COO of ChemConnect.com, an independent chemicals marketplace. "It doesn't have a direct impact on us, but it clarifies the landscape for all of us. It's better to get any clouds out of the way."

The FTC staff report follows a two-day fact-finding workshop the agency held in Wash-ington last June. The report includes a description of the components of a b-to-b marketplace and the efficiencies they may provide. More importantly, it provides a basic framework for answering antitrust questions in the context of b-to-b marketplaces.

"The antitrust concerns [marketplaces] may raise are not new," FTC Chairman Robert Pitofsky said in releasing the analysis. "The report does not warn of insoluble problems, but rather lays the foundation for identifying and addressing circumstances that warrant antitrust scrutiny."

In the final section of the report, the FTC examines possible anti-competitive issues that marketplaces, especially so-called industry coalition marketplaces, could raise.

In particular, marketplaces will be closely watched if their owners represent a particularly large industry market share, in some way restrain trade from occurring outside the market or do not operate openly with other e-markets, the report said.

At the same time it delivered these warnings, however, the FTC noted that most antitrust concerns can be eliminated through well-crafted e-market operating rules.

The full report can be accessed at www.ftc.gov/os/2000/10/in-dex.htm#26.

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