Donald S. Clark
Comments Regarding B2B Electronic Marketplaces
Dear Mr. Clark:
Thank you for the opportunity to respond to the Federal Trade Commissions request for comments concerning competition policy and business-to-business electronic marketplaces.
Ernst & Young is a global leader in providing auditing, tax and advisory services through our 77,000 people in more than 130 countries. Among those services we provide our clients with fresh perspectives on operating successfully in the new economy and a comprehensive suite of solutions to established and emerging business-to-business electronic marketplaces ("eMarkets"). Ernst & Young understands the unique issues and complexities associated with developing and maintaining eMarkets, and can offer an objective point of view on how eMarkets and their stakeholders (i.e., owners, participants, the public and regulators) can best address competition issues and related issues of trust.
The potential benefits of proposed eMarkets are significant. They promise to provide the opportunity for businesses to leverage technology and make dramatic leaps in improving operational efficiency and effectiveness. While we cannot comment directly on the potential for abuse of competitive market practices, we can comment on eMarket stakeholders concerns and how to build confidence in eMarket practices. Broadly, stakeholder concerns range from inadequate systems and internal controls, insufficient security, and potential commingling of data, to concerns that eMarket owners may overtly act in an anti-competitive manner. For example, eMarket participants do not want their competitors to have access to their client lists, pricing information, customer-satisfaction levels, and purchasing trends and habits. eMarkets need to establish trust with their participants and the public stakeholders. Failure of an eMarket to be viewed as a trusted, secure and impartial marketplace could raise stakeholders concerns and result in reduced levels of participation and the ability to maintain long-term viability.
To address these concerns, nascent industry self-regulatory activities are being undertaken by the eMarkets in conjunction with the eMarket owners, participants and other various stakeholders. These activities include formally publishing entity security and confidentiality policies and obtaining various "seals" of approval. It is our belief, however, that self regulation by the eMarkets would be facilitated by the adoption of a more comprehensive and robust self-regulatory framework. This framework should include the development and acceptance of standards that have been subjected to public due process and, importantly, verification of adherence to those standards by an independent, third party assurance provider.
Comprehensive standards should address the concerns of the stakeholders related to the eMarkets business model and operations. Following are some of those concerns:
Comprehensive standards are necessary to increase stakeholder understanding of the nature of eMarkets and to ensure consistent application of the standards and accountability by the eMarkets. For example, today, eMarkets employ varied policies for confidentiality and security of eMarket information that may not clearly articulate to stakeholders the access others have to their data. Consistent industry-wide standards would provide an avenue to remedy this confusion and provide a platform to obtain public confidence in eMarket practices. Because such standards would necessarily need to reconcile the conflicting needs of various stakeholders (i.e., balancing the need to limit the sharing of competitive information against the desire to promote information-based efficiencies), we believe that the FTC could play a role in fostering the development of these comprehensive standards.
Moreover, our experience tells us that stakeholders will desire assurance that eMarket participants actions follow the comprehensive standards. We believe that significant value is realized when assurance is provided by an independent third party that actively tests to ensure that the eMarkets "do what they say they are doing." If standards are not complied with, the independent attestation report is withdrawn. In this way, trust is built by the eMarket and the positive benefits of dramatic efficiency and effectiveness are realized.
We would be pleased to discuss our comments and recommendations with the members of your staff.
Ernst & Young