FTC Scrutinizes Big 3 Automakers' E-Marketplace Plans

The Federal Trade Commission confirmed today it is reviewing plans the big three automakers have to build an E-marketplace for auto parts, raw materials, and components.

FTC spokeswoman Claudia Bourne Farrel confirmed officials are reviewing the matter, but would not comment any further. It has been reported that the FTC is looking into whether the E-marketplace, disclosed last month, would violate any antitrust laws.

GM says it was caught of guard by the media reports. "At this time we have not been officially contacted by the FTC regarding a preliminary inquiry. We fully intend to abide by all legal requirements, and we don't expect any negative repercussions from any investigation," says a General Motors Corp. spokesman.

DaimlerChrysler, Ford, and GM said they are creating a company to operate a business-to-business exchange through which they and other auto makers can buy materials for building cars and collaborate with partners. They're billing the effort as "the world's largest Internet-based virtual marketplace."

At heart of the matter is whether or not the exchange will involve the sharing of information among the competitors that could then lead to price fixing, says Hillard Sterling, a partner with Gordon & Glickson, an international law firm specializing in information technology.

"When competitors exchange their key business information they arguably impact the competitiveness of their pricing," Sterling said. "Antitrust law precludes competitors from working together or sharing information if the effect is to shape their pricing in the markets."

Sterling says the FTC inquiry into the automakers' exchange is only the beginning. "You can assume that the government is looking at all of these deals. They all raise similar concerns of potentially anti-competitive collaboration," he says.

And the FTC has plenty of fodder to look into. E-marketplaces are popping up daily across a variety of industries. In recent weeks sites have been launched to serve the auto-parts, telecommunications, and trucking industries, while existing E-marketplaces such as PlasticsNet.com and Gofresh disclosed plans to add service-oriented functions. Chemdex, an E-marketplace operator in the chemicals and laboratory supplies industries, launched Broadlane Inc., a vertical marketplace for acute care hospitals and their suppliers. Chemdex also restructured with the goal of creating even more online exchanges.

Sterling says the FTC inquiries won't slow the frenetic pace of E-marketplace growth, but they may give pause to companies scrambling to establish such exchanges. "Companies must be careful to ensure their compliance with antitrust law. Any time competitors work together, they better be very careful to stay within well-established areas of collaboration," he says.

Last fall, the FTC and the Department of Justice announced plans to write antitrust guidelines for collaborations among competitors. Today, FTC chairman Robert Pitofsky told members of the Senate Judiciary Committee the guidelines are moving along.

"In today's market, competitive forces are driving firms toward complex collaborations to achieve goals such as expanding into foreign markets, funding expensive innovation efforts, and lowering production costs," Pitofsky said.

The guidelines will serve as "the dos and don'ts of these business-to-business arrangements," according to Gordon & Glickson's Sterling.