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eMarketplaces Emerge As A New Antitrust Battleground, Predicts Forrester Research

Cambridge, Mass., November 15, 2000 . . . Antitrust problems won't seriously hinder eMarketplaces for the next three to five years, Forrester Research, Inc. (Nasdaq: FORR) predicts. But the eventual shakeout of eMarketplaces and the Internet's restructuring of business over the long term will create new legal uncertainties for businesses, policymakers, and regulators.

"As eMarketplaces and online trade become an integral part of how industries operate, business on the Internet will resemble a massive round of deregulation," says Jay Stanley, analyst, Forrester Research. "You will see an initial burst of competition, but it will give way to a new set of winners that will gain dominance and lower the intensity of competition again.

In addition, the competitive landscape in many industries will be reshaped by the Internet. What will be new about competition online? The first change will be the transparency of information, which will expose new details about companies' prices, costs, and performance. Second will be network effects, which will drive consolidation. Finally, the Net's global scope will make it easier for buyers to do business with worldwide sellers that they would have never known existed when they had to shop by phone and fax.

Antitrust regulators, judges, and academics will have to adapt the law to the new environment. Currently, antitrust statutes are broad, so their application to the economy will become less and less clear as competition changes, leaving businesses hungry for certainty. These changes will drive antitrust policy through three phases: 1) uneasy consensus; 2) eMarketplace scrutiny; and 3) increased oligopolization.

An uneasy consensus will evolve over the next two years as eMarketplaces fine-tune their operations and adjust their business models while the bulk of B2B trade remains in traditional channels. The top B2B antitrust concerns being identified today -- price fixing, exclusion, monopsony, and illicit information sharing -- will not prove to be major because eMarketplace operators will strive to prove their neutrality, while antitrust counsels will spot other problems before they take root.

As the number of surviving eMarketplaces dwindles toward natural monopoly levels around the middle of the decade, antitrust scrutiny will focus on the exchanges themselves. As online trade is channeled through fewer exchanges, legal uncertainties will emerge about how to handle mergers between eMarketplaces. Some policymakers will want to intervene to prevent markets from tipping to a single eMarketplace, while others will advocate for a more laissez-faire approach. Meanwhile, as eMarketplaces become more tightly interconnected, regulators will have to choose whether to get embroiled in technology issues or let companies leverage dominance through interconnectivity.

The success of eMarketplaces will act as a catalyst for greater oligopolization in many industries by 2006. Antitrust policies will have to be re-evaluated to address suppliers, buyers, and the exchanges in which they do business. Regulators also will need to address global coordination policies as online oligopolies stretch across the globe.

"The emergence of eMarketplace oligopolies will lead to renewed debate about whether the government should intervene in the market or simply regulate it to make sure that monopolies are not abused," added Stanley. "These debates will be complicated by legal battles over new product and market definitions. It will take years to arrive at a coherent set of standards as authorities make decisions on a case-by-case basis."

For the "The B2B Antitrust Minefield" Report, Forrester interviewed professionals from more than a dozen organizations, including law and consulting firms, government and academic institutions, and trade and commerce agencies.

Forrester Research is the leading independent Internet research firm, analyzing technology change and its impact on business, consumers, and society. Forrester's "Whole View" of the Internet economy enables clients to weave together Internet commerce initiatives with eBusiness technology to satisfy customers' changing needs. Clients receive continuous research and analysis through Forrester eResearch™ Reports, an array of advisory services, assessment tools, and topical events. Established in 1983, Forrester is headquartered in Cambridge, Mass. Forrester's European Research Center is located in Amsterdam, Netherlands, and its UK Research Centre is located in London. Additional information about Forrester Research can be found at www.forrester.com.

Contact:

Mariko Zapf
Manager, Public Relations
Forrester Research, Inc.
+1 617/613-6255
press@forrester.com