Commerce Commission not eyeing exchanges

Despite the proliferation of B2B marketplaces in New Zealand the Commerce Commission is not planning a policy to vet them for anti-competitive activity.

Despite the proliferation of B2B marketplaces in New Zealand the Commerce Commission is not planning a policy to vet them for anti-competitive activity.

In the US federal antitrust regulators scrutinised the development of an exchange by carmakers General Motors, Ford and DaimlerChrysler before giving it the go-ahead. The inquiries centred on antitrust concerns about cooperation between companies that compete against each other in the same industry. The commission’s US equivalent, the Federal Trade Commission (FTC), warned that the exchange, called Covisint, could be investigated further and it is still to gain approval from European regulators.

Online marketplaces setting up in New Zealand will be looked at only if anti-competitive issues arise, says Commerce Commission spokesman Vince Cholewa. “The specifics depend on the relationships within each market or exchange,” he says.

An online marketplace permits the electronic exchange of information, bids and transactions between buyers and sellers, usually in a particular industry or market segment. Last month the FTC released a report setting forth “guideposts” for evaluating the potential antitrust implications of online B2B exchanges.

The report says antitrust-related inquiries into individual online exchanges would have to be “highly fact-intensive” – making it difficult to set a single policy for evaluating all such proposals. But it says anticompetitive concerns “are more likely to be magnified” if three conditions are met: a high aggregate market share for the participants in an industry-specific B2B exchange, a high level of restraints on processing supply-chain transactions outside the exchange and limits on interoperability with other internet-based marketplaces.

New Zealand has half-a-dozen exchanges in operation or about to go live including Woolnet (for buying and selling wool), Biolab (for medical and scientific supplies), RD1.com (aimed at the farming community), and Woodnet (a timber trading exchange slated to go live in December). Seafood distributor Sanford is part of a global exchange called SeafoodAlliance with 12 other companies, and the New Zealand Timber Industry Federation is part of Lignus, a world wide exchange for the timber industry which has members from 14 countries around the Pacific Rim. Three exchanges, SupplyZone, SupplyNet and e://volution, are horizontal markets offering office supplies. However, there are to date no New Zealand online marketplaces which involve large competitors co-operating as is the case with Covisint.

Speaking at the recent e-commerce summit in Auckland, US venture capitalist Arthur Sculley said there are 450 industry vertical markets around the world and each one probably has a B2B exchange already or one coming. He said there are about 1100 B2B exchanges around the world and predicted that this would increase to 3000 in the next 18 months. However, a shakeout would see this shrink to about 600 survivors in the next two to three years, he said. Factors for survival will be liquidity, volume of users and neutrality, he said.

He said the phenomenon of industry consortia forming around electronic exchanges only began in February this year.

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