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Commentary: Antitrust concerns about e-markets are likely overblown

Government regulators fear that the same vehicles that enable e-markets to increase market efficiency could also facilitate anti-competitive practices such as price-fixing.

By George Reilly, Gartner Analyst

The U.S. Federal Trade Commission and other government regulators have shown increasing concern over e-markets, because they often bring together the most powerful vendors, in particular, industries in a forum that enables them to communicate easily.

The authorities fear that the

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same vehicles that enable e-markets to increase market efficiency could also facilitate anti-competitive practices such as price-fixing.

Gartner believes that e-markets do not make illegal collusion more likely, nor will they force a reinterpretation of antitrust laws. Price fixing by suppliers in an industry is illegal, regardless of how buyers and suppliers communicate. E-markets know that.

MetalSite, for example, includes about 50 steel producers or providers as participants, seven of which also have an ownership interest in the e-market. When MetalSite holds board meetings, an antitrust lawyer is present to cut short discussions if they begin heading toward dangerous ground.

Moreover, although e-markets could potentially facilitate illegal collusion, they also make such illegal behavior easier to detect, because an audit trail of all communications, bids, pricing and other key aspects of transactions would be available from the e-market's central electronic record store.

Whether government antitrust regulations will restrict the activities of e-markets will likely be decided on a case-by-case basis. The key measure is whether businesses that want to compete in a market need to participate in the e-market. Is it considered an essential facility of that market? If so, the e-market must establish consistent rules governing the ability of businesses to participate.

A further concern with e-markets is misuse of marketplace information by owners and participants. Participants divulge sensitive information (for example, about pricing and buying requirements) that would place them at a disadvantage if their competitors found out. One worry is that e-market owners and participants will gain access to such information and use it to their advantage.

However, if e-markets are to develop a critical mass of participants and transactions, they must instill confidence in businesses that vital information will be protected and confidentiality maintained. Gartner believes that most e-markets will do so.

(For related commentary on the effect of business-to-business exchanges and potential stumbling blocks to this new business model, see TechRepublic.com--free registration required.)

Entire contents, Copyright © 2000 Gartner Group, Inc. All rights reserved. The information contained herein represents Gartner's initial commentary and analysis and has been obtained from sources believed to be reliable. Positions taken are subject to change as more information becomes available and further analysis is undertaken. Gartner disclaims all warranties as to the accuracy, completeness or adequacy of the information. Gartner shall have no liability for errors, omissions or inadequacies in the information contained herein or for interpretations thereof.