Market Trends

Will Internet-Enabled Procurement Systems Lead to FTC Regulations

September 4, 2000

by Mike Antich

Covisint is a joint venture among GM, Ford, DaimlerChrysler, Nissan, Renault, and key Tier One suppliers. It is a Web-based, business-to-business market exchange designed to buy and sell automotive parts and supplies over the Internet. Similarly, Roadsmith.com is an online portal designed by the Avis Group to provide one-stop shopping for small to mid-size fleets in an electronic "open marketplace," which will also provide online fleet management capabilities.The FTC has targeted Covisint for closer scrutiny because of anti-trust concerns. Similarly, the U.S. Justice Department is also investigating another industry B2B exchange created by Continental Airlines, United, Delta, Northwest, and American Airlines for possible anti-trust implications.B2B procurement exchanges are proliferating throughout the U.S. economy in a variety of industries, ranging from aerospace to paper to steel to agribusiness. Recognizing that this will most likely be the way most transactional business will be conducted in the future, the FTC is concerned about the competitive implications of this new technology, which is what prompted the public hearings in Washington, DC.The FTC is an Enforcement AgencyBefore you dismiss the June 29-30 public hearing as simply another bureaucratic exercise, it is wise to remember that some of the other FTC's most far-reaching pronouncements have resulted from similar fact-finding functions. A classic example is a fact-finding study of the radio broadcasting industry conducted 66 years earlier, which ultimately led to the passage of the Federal Communications Act of 1934. This legislation has had far-reaching consequences for the entire broadcasting and communications industries ever since.Can such a thing occur in the automotive industry, which by default would extend to the fleet industry?Students of our industry will tell you that this isn't the first time the federal government has probed into how business is conducted between auto manufacturers and commercial fleets. As recently as 1983, H.R. 1415 sought to prohibit manufacturers from selling autos to leasing companies and fleets at prices lower than to dealers. It was defeated in the U.S. House of Representatives. In 1977, a price-fixing suit alleged that the Big Three had conspired to fix prices for large fleet customers; however, a federal judge dismissed it. Likewise, in 1971, 1972 and 1974, federal government charges were levied against auto manufacturers similarly alleging price fixing using fleet incentives.As can be seen by these past examples, the federal government has shown an interest in our industry. What's sobering about the June 29-30 public hearings on B2B marketplaces is how the FTC views them. Here are the words of Susan DeSanti, director, policy planning for the FTC, who was instrumental in orchestrating the June 29-30 public hearings."It is important to remember that the FTC is an enforcement agency. It's taken the first step by holding a workshop. The question is: what's next?" asked DeSanti.Indeed, what is next? The underlying FTC concern about B2B marketplaces is whether competitors are going to be able to see each other's data and tacitly or explicitly reach some kind of agreement on prices. The FTC is also asking, what's going to happen to the data that these marketplaces are creating and storing? Who owns the data and will business confidentialities be violated in sharing it?The fleet management industry, along with the entire U.S. economy, is in the midst of shifting much of its transactional business to Internet-enabled procurement systems.Let's hope that the federal government's scrutiny doesn't have a chilling effect on the emergence and development of these online markets. This would be a step backward for the fleet industry, the automotive industry, and the U.S. economy as a whole.Let me know what you think.

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Mike Antich

Editor and Associate Publisher

Mike has covered fleet management and remarketing for more than 20 years and entered the Fleet Hall of Fame in 2010.

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