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e-Commerce Collusion? The Trustbusters Take Aim

Privacy Concerns: Can Gaming Be Prevented?
Fortnightly Magazine - September 1 2000

Inc.'s prices were being searched by auction aggregator Bidder's Edge, eBay cried copyright infringement. eBay's lawsuit contended that Bidder's Edge was trespassing when it culled listings from deep in eBay's site. In late May, a federal judge sided with eBay Inc., and issued an injunction barring Bidder's Edge from using an automated system like a Web crawler to search eBay's site for information about its auctions, according to a report in Computerworld Online. A California law that prevents unauthorized computer intrusion into databases also protected eBay.

"People forget that prices quoted on the New York Stock Exchange or the New York Mercantile Exchange are copyright-protected," said one executive.

Consequently, the use of shop bots would either have to be through agreement among industry exchange owners or by pronouncement of the FTC, said a workshop participant.

Others argued that even without shop bots, e-commerce markets that exhibit market power will be disciplined by new entrant independent exchanges at the first opportunity.

"If buyers and sellers share too much information and prices are [affected], the market self-corrects," said Mark L. Walsh, president and CEO at VerticalNet, an owner and operator of industrial trade communities.

But Walsh said that worse than collusion is the denial of information by some exchanges to other exchanges. "The problem is not the information itself, but denial of information," he said.

In addition, workshop participants representing suppliers claimed that supplier-led exchanges may introduce procurement catalogs that are seen by some rival suppliers and not others.

Moreover, Walsh believes that there are industries where geography and integration can be a barrier to entry. He explained that after big companies have spent millions integrating their back-office systems with two or three exchanges, they will be less likely to jump to yet another exchange.

FTC regulators questioned whether interoperability standards could pose another significant barrier to entry.

"What happens if [one market] is selling a product that cannot be found on the other?" asked Gary Fromer, vice president of new business and partner solutions at SAP America.

"As market places achieve critical mass, there will need to be industry standards," Fromer said. He added that interoperability has not been enough of a problem to require a standard.

Commerce Extensible Markup Language (cXML) was used to get the inter-exchange started, he explained. cXML began as a collaboration among more than 40 companies looking to reduce the costs of online business. It is used to standardize the exchange of catalog content and define request/ response processes for secure electronic transactions over the Internet. The processes include purchase orders, change orders, acknowledgments, status updates, ship notifications, and payment transactions.

But Rod Gray, chief financial officer at Petrocosm, a procurement website that enables companies to buy and sell products and services in the oil and gas industry, said that it was the financial barriers that led oil majors such as Texaco and Chevron to seek an alliance or ownership stake in Petrocosm.

"You need liquidity equating to $10 billion to make your market. It cost between $100 and $200 million to create Petrocosm.Com. The efficiencies of sharing