In Part One of this series, we pulled back the covers on corporate purchasing and took a look at some of the privacy problems that often ensue. In this second and final segment of the series, we''ll look at what the U.S. Federal Trade Commission (FTC) and Department of Justice (DoJ) are up to in preventing privacy problems in B2B environments.

Serpents In The Garden Of Efficiencies
As enticing as entry into a B2B market has become, the potential for problems has begun to pique the interest of the FTC. While the FTC isn''t in any great hurry to impose tight regulations now, they''ve made it crystal clear that if exchanges begin to behave as cartels, monopolies, monopsonies, or breach privacy or security, they might wind up in an antitrust action against them.

What''s A Monopsony? According to the Economic Gloss*arama, a monopsony is a market characterized by a single buyer of a product. Monopsony is the buying-side equivalent of a selling-side monopoly. Where a monopoly describes a single seller in a specific market, a monopsony is a single buyer. Like a monopoly seller, a monopsony buyer is a price maker with complete market control. Monopsony is also comparable to a monopoly in terms of inefficiency. Monopsony does not generate an efficient allocation of resources. The price paid by a monopsony is lower and the quantity exchanged is less than would be had if the market were perfectly competitive.

"The promise of huge efficiencies from B2B is certainly tantalizing. On the other hand, I can''t help but wonder if there might be a serpent in the garden of efficiencies," said FTC Commissioner Sheila Anthony in her remarks before the FTC Workshop On Competition Policy In The World Of B2B Electronic Marketplaces in June 2000.

Beginning in 2000, the U.S. government began looking closely at B2B e-markets, and are seeking input from the industry to help them understand the landscape -- and prepare to regulate it closer should it become necessary. In April 2000, the FTC and the U.S. Department of Justice published the Guidelines For Collaborations Among Competitors as guidance on how to avoid certain problems (see sidebar).  

FTC and DOJ Issue Antitrust Guidelines for Collaborations Among Competitors The FTC and the Antitrust Division of the U.S. Department of Justice (DOJ) have issued the "Antitrust Guidelines for Collaborations Among Competitors." They are the first set of guidelines issued jointly by both federal antitrust agencies that address a broad range of horizontal agreements among competitors, including joint ventures, strategic alliances, and other competitor collaborations. The guidelines describe an analytical framework to assist businesses in assessing the likelihood of an antitrust challenge to a collaboration with one or more competitors. Competitive forces of globalization and technology are driving firms toward complex collaborations to achieve goals such as expanding into foreign markets, funding expensive innovation efforts, and lowering production and other costs. The increasing varieties and use of collaborations by rivals have yielded requests for improved clarity regarding their treatment under the antitrust laws. "The ''Competitor Collaboration Guidelines'' provide sound analytical guidance for a business environment characterized by increasing collaborative activity," Chairman Pitofsky said. "The guidelines will help businesses assess the antitrust implications of collaborations with rivals, thereby encouraging pro-competitive collaborations and deterring collaborations likely to harm competition and consumers. We thank all of those who participated in this process and provided thoughtful assistance and comments that helped bring the guidelines to fruition." Commissioner Thompson said, "I strongly support the guidelines because I believe they represent an important step in providing the public with an overview of our analysis of strategic collaborations and responding to an increasingly dynamic marketplace... The new guidelines will be useful in explaining how the FTC and DOJ analyze antitrust issues associated with these collaborations, although no set of guidelines can answer every question that might arise, and we acknowledge that there may be areas in which additional guidance is desirable." Copies of the guidelines are available from the FTC''s Web site.

Information sharing within B2B e-markets has the potential for causing concerns and should force you to ask yourself these questions:

• Could specific information I collect and accidentally (or willfully) divulge point to collusive activity?
• Is information I provide already available through other sources, or does the ease or speed of releasing the information through the marketplace make it more valuable to some than others?
• Are policies, processes, firewalls and other security and privacy mechanisms in place to limit the exchange of competitively significant information without interfering with the functioning of the site or the marketplace?

FTC''s Warning Signs
The FTC has already begun to scrutinize supply-chain trading networks for anti-competitive activities like price signaling, collusion, and freezing out competitors. Legal experts at the FTC recommend that traders maintain secure enough systems to keep pricing and trade secrets confidential. They further recommend that firewalls be used to keep catalog, pricing, bids, and auction data safe from prying eyes of competitors within the exchange.

Some red flags that the FTC says will get you into hot water with a B2B exchange include:

• Forming cartels to fix prices or allocate markets
• Allow competitors to see one another''s prices in electronic catalogs and auctions
• Allow competitors to signal future price increases or discounts
• Unfairly restrict who can join an exchange or prohibit participants from joining other exchanges
• Allowing competitors to openly discuss prices, outputs, costs, or strategic plans on forums or discussion boards that you offer as a service on your B2B site.

Some of the experts at the FTC workshop indicate these primary ways to avoid antitrust problems:

• Assure that access to the exchange remains open so that members are free to come and go
• Keep prices and trade secrets of all participants confidential
• Maintain both procedural and electronic firewalls to keep competitors from learning one another''s confidential data
• Adopt industry standards for all facets of operating within the exchange