FTC Warns of Possible Antitrust Issues

SAN MATEO (06/30/2000) - U.S. Federal Trade Commission Chairman Robert Pitofsky this week urged business-to-business exchange builders and others to think through potential competition issues in their emerging industry. He was speaking at a workshop organized by the FTC for e-commerce companies.

Pitofsky told attendees that there are potential antitrust issues looming over b-to-b e-marketplaces.

"We know that in theory, some of these marketplaces could give rise to antitrust concerns," Pitofsky said. He added, "This workshop is not an effort to seek out law enforcement targets. Rather, it continues a tradition reflective of the FTC's unique role: to study competition and work with the business community and others to detect new trends."

The FTC expected more than 60 industry players, antitrust practitioners, academics, and consumer groups to attend its two-day workshop, "Competition Policy in the World of B2B Electronic Marketplaces."

A panel including representatives from health care, fuel, and chemical companies discussed the obvious benefits of b-to-b and its pitfalls. In addition to driving costs down and helping companies eliminate inefficiencies, b-to-b can help cut the cost of making face-to-face sales calls, which one participant estimated at about $575 each.

But the participants expressed concern about possible pitfalls with b-to-b, including the issue of trust, which participant Charles Libicki, co-principal at Interface Logic Systems, said "looms very large."

Another panelist expressed even greater concern, saying b-to-b needs to develop trust-building services that now are only embryonic.

Hal Loevy, vice president of global marketing and partnerships at SGSonSite, a division of SGS Societe Generale de Surveillance, in Geneva, said as things stand today, neither buyers nor sellers can trust anonymous trading partners at the other end of the transaction.

"Surprisingly, this lack of trust in the broad sense has received only scant attention, eclipsed by stories of viruses usurping the Internet," Loevy said.

"The fact is, viruses are only one of many trust-violating icebergs that must be avoided if our e-commerce ship is ever to come in."

Loevy said the huge promise of b-to-b e-commerce is at risk not because of antitrust issues, but because of the lack of confidence in trading online.

The panel also discussed standardization concerns, which could hurt markets because products will become more and more alike or "commoditized," participants said. When products are forced to go "on stage" in a b-to-b environment, where customers can easily compare other similar products, customers demand the products become standardized, said Harpal S. Sandhu of Integral Development.

Sandhu opined that all products eventually will move to b-to-b trading, but added that some products are too complex to be standardized.

Margret Johnston, a Washington correspondent for the IDG News Service, an InfoWorld affiliate, contributed to this report.

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