FRAMINGHAM (09/11/2000) - Federal antitrust regulators today gave an initial green light to the online exchange being developed by the Big 3 automakers, potentially clearing a major hurdle for other Internet-based business-to-business ventures involving cooperation between companies that compete against each other in the same industry.
The U.S. Federal Trade Commission (FTC) granted its tentative approval to the proposed auto exchange, called Covisint, after two rounds of inquiries into the plans announced earlier this year by General Motors Corp., Ford Motor Co. and DaimlerChrysler AG. The FTC's investigation focused on antitrust concerns and the underlying technology infrastructure that Covisint plans to use.
But in a statement issued today, the FTC said its investigation is being closed for now - although the commission noted that it could reopen the matter in the future because Covisint is in such an early stage of development that FTC members "cannot say [the] venture will not cause competitive concerns."
FTC members also noted that the decision to let Covisint proceed with its plans doesn't necessarily mean that other online exchanges can expect to get similar treatment from the commission.
Business-to-business exchanges "have a great potential to benefit both businesses and consumers through increased productivity and lower prices," said FTC Chairman Robert Pitofsky as part of the statement. But like any other joint venture between companies, online marketplaces "should be organized and implemented in ways that maintain competition," Pitofsky added. "The antitrust analysis of an individual [exchange] will be specific to its mission, its structure [and] its particular market circumstances."
In an interview last Friday, FTC member Mozelle W. Thompson made a similar point, saying that the consideration of proposed exchanges "is not a one-size-fits all proposition" because individual online marketplaces frequently are very different from one another.
Covisint spokeswoman Alice Miles said receiving the go-ahead from the FTC would allow the Southfield, Mich.-based company to find a permanent location and move forward with a search for a permanent CEO. The exchange now hopes to open for business by year's end, she added.
But the FTC isn't the only governmental body that has been investigating the massive automotive exchange. Covisint officials today confirmed that the German Federal Cartel Office, known as the Bundeskartellamt, also has an inquiry under way. Miles said Covisint had submitted documents to the German governmental agency and fully expects to receive its approval.
The Big 3 automakers have invested $200 million in Covisint thus far. Renault SA and Nissan Motor Co. have also signed on to join the exchange as non-owner participants. Together, the five automakers could potentially process up to $300 billion in annual purchases through Covisint..