The German Federal Cartel Office (FCO) has recently published two press releases that set out strict requirements for competition law-compliant business-to-business (B2B) e-commerce platforms (see here and here).
These platforms have been a hot topic among businesses and competition authorities alike. On the one hand, they offer significant opportunities to businesses, ie access to a greater choice of buyers/suppliers, higher efficiency and productivity, reduction of administration, processing and other costs, provision of additional services etc. and can therefore benefit competition. On the other hand, they present competition law concerns because – similar to market information systems – they lead to higher market transparency and might thereby facilitate collusive behaviour.
Andreas Mundt, President of the FCO, illustrated the pros and cons of a B2B platform in relation to the steel industry: 'The offer of a digital business to business trading platform for steel products will simplify order transactions and order management. However, an excess of market transparency can make agreements easier or even unnecessary if conclusions can be drawn about the future pricing strategy of individual traders.'
The press releases relate to platforms envisaged in the steel and cement industry, but highlight three main requirements that are applicable across all sectors:
- the platform operator is independent or organisationally separated from all competitors on the buyer and supplier side;
- the platform does not publish any competitively sensitive information, especially relating to future pricing strategies and capacities of competitors; and
- depending on a potential market dominant position of the platform and/or the company running the platform, the platform might have to be accessible to all market participants without any form of discrimination.
There are various ways of implementing these requirements.
As regards the separation of the platform from competitors, the safest way is for it to be operated by an independent third-party company. However, competition law compliancy may also be achieved when the platform is operated by a competitor. This requires a system that ensures full organisational separation from all other business activities of the competitor, ie management through a subsidiary or a part of the competitor’s company strictly separated (through information walls and ideally managed in a separate building or office and by different employees).
With regard to avoiding the exchange of competitively sensitive information, the platform must be designed in a way that exclusively provides information regarding pricing, capacities etc to the buyer in a specific transaction. This might be achieved through a secret auction system or a registration process ensuring that the information is not openly provided to competitors on the platform, but only passed on to authorized buyers at the last step of the transaction.
Lastly, as the platform must be open and accessible to all competitors without discrimination, it must be guaranteed that no single competitor – even the one who manages the platform through an organisationally separated entity of its company – has any advantage in the access to data.
With these safeguards in place, Mundt concluded in the case above: 'we now estimate this risk as relatively low. In its current form the planned operation of the platform as a unit which is organisationally independent of the Klöckner group will not create any further price transparency in the market.'
It is important to note that businesses have no right to have such a 'pre-check' and decision by the FCO. However, given the relative novelty of these platforms and the possible solutions to the competition law problems they pose, it is to be welcomed that the FCO gave some indication on what it is likely to accept in the future.
