FTC Clears Road for Automotive Industry Exchange - International Law Office

One cloud that had hung over industry-sponsored business to business (B2B) exchanges was lifted when the Federal Trade Commission (FTC) closed its investigation of Covisint. Covisint is a B2B exchange involving five automotive manufacturers that account for roughly 50% of the total worldwide automotive production and also included 12 major parts suppliers. The action signals the FTC's view that the formation of exchanges by competitors, even when they make up a large share of the industry, is not inherently suspect (although the operation of exchanges will continue to be subject to antitrust scrutiny).

While closing its investigation of the first B2B exchange it has reviewed, the FTC specifically reserved the right to take further action in the future considering Covisint's large market share. Covisint has not adopted bylaws, operating rules or terms for participant access and is not yet operational. For these reasons, the FTC was unable to conclude that the operation of the Covisint venture would not cause competitive concerns in the future, although it will not take action to block the venture.

In commenting on the FTC's decision, FTC Chairman Robert Pitofsky acknowledged the potential benefits of B2B marketplaces and noted that they will be reviewed on a case-by-case basis. He stated:

"B2Bs have a great potential to benefit both businesses and consumers through increased productivity and lower prices ... The antitrust analysis of an individual B2B will be specific to its mission, its structure, its particular market circumstances, procedures and rules for organization and operation, and actual operations and market performance."

It is reported that the FTC expects to set forth more specific guidelines for B2B exchanges next month.

For further information on this topic please contact Richard Rosen or Bertrand Lanciault at Arnold & Porter by telephone (+1 202 942 5000) or by fax (+1 202 942 5999) or by e-mail (Richard_Rosen@aporter.com or Bertrand_Lanciault@aporter.com).

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