Normal trading rules apply for e-procurement



Most business-to-business (B2B) marketplaces have the potential to generate enormous savings over more traditional methods of selling or procuring goods...



Most business-to-business (B2B) marketplaces have the potential to generate enormous savings over more traditional methods of selling or procuring goods and services, by making such operations quicker, more efficient and less costly.

However, a co-owned B2B marketplace may have quite the reverse effect, if it provides the participants, who would otherwise be in competition with one another, with the potential either to fix prices for goods and services, to impose onerous restrictions on suppliers and purchasers, or to discriminate between those who would seek to join their club.

So what are the rules in this area?

Competition authorities have been slow to set out clear guidelines over the regulation of Internet marketplaces, creating not only uncertainty, but considerable frustration given the powers that exist within the European Union and the UK to fine organisations that get it wrong.

Responsibility for clarifying the position rests with the Competition Directorate at a European level, and with the Office of Fair Trading (OFT) in the UK.

August saw them take the first steps in this direction, with the clearance by the European Commission of the B2B exchange, My-Aircraft.com, almost coinciding with the publication by the OFT of its discussion paper, E-commerce and its Implications for Competition Policy.

Both bodies concluded that e-commerce will not create any new competition law issues that can not be dealt with under the existing framework, and that each case must be looked at on its merits.

So, how to manage the risks? Until clear guidelines are issued, competitors contemplating participating in a B2B marketplace should, among themselves, avoid the following types of activities which could leave them exposed to the risk of a fine:

  • Reaching a formal or informal agreement on price levels.

  • Inflating prices by charging fees to buyers or sellers for using the marketplace.

  • Sharing information on their prices, production and markets (except about the running of the exchange.)

  • Sharing detailed transaction information from the marketplace with one another. Strict rules should be set up to ensure the confidentiality of such data.

  • Automating price-setting by using integrated IT systems. These could enable one participant to set prices for all the other participants, and to punish a participant who steps out of line.

  • Refusing membership to the marketplace other than on objectively justifiable grounds.

  • Setting excessively high or low prices depending on whether it is a supply or purchase marketplace.

    Each participant should also arrange separate long-term storage of its own electronic data. They might also be advised to develop their own market-monitoring search engine software, with the aim of detecting collusive behaviour on prices, sales and conversations in chat rooms.

    For further information contact DLA's Janice Collino on 0207-796 6445.

    Summary

  • Regulatory bodies are the EU Competition Directorate and the UKOffice of Fair Trading

  • Existing rules against anti-competitive behaviour already cover e-business - don't wait for new laws

  • Avoid activities that might lay your company open to investigation

  • This was last published in September 2000

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