Update: 'Big Three' B2B Exchange Gets FTC Approval - TheStreet

Updated from 4:43 p.m. EDT

The

Federal Trade Commission

said Monday that it had approved a huge online business-to-business marketplace set up by the Big Three automakers without requiring any immediate concessions.

The commission, though, said it would continue to keep a close eye on

Covisint

, the Internet exchange organized in February by

Ford Motor

(F) - Get Report

,

General Motors

(GM) - Get Report

and

DaimlerChrysler AG

(DCX)

.

The venture, which connects buyers and sellers of auto parts and supplies, promises to generate huge cost savings, improve communication, and speed up product development.

Nissan

of Japan and

Renault

of France, who joined the partnership in April, are working to develop operations in Asia and Europe. (It's unknown which companies will supply the technology for the exchange, though

Commerce One

and

Oracle

are working together on it.

TheStreet.com

looked at this issue earlier.)

Now that the automakers have received the commission's blessing, they're turning their attention to German regulators, who are expected to complete their review during the fourth quarter of this year. Alice Miles, a Ford official who co-manages the project, said in a conference call Monday that the carmakers hope to begin the operation within 30 days after gaining German clearance.

About 25 suppliers have agreed to use the online marketplace, but it could "take some time to roll out those 25," Miles said. The founding carmakers, which spend about $300 billion dollars a year on supplies, are still looking for a chief executive to lead the enterprise.

The decision, at least for now, puts to rest a number of regulatory concerns. The FTC began looking into the venture earlier this year to determine whether the Internet partnership among rivals would lead to collusion or other anticompetitive activity that violates U.S. antitrust law.

But antitrust regulators were ultimately satisfied with the venture's ambitious designs, having determined that the pact could live up to its billing and result in huge efficiencies and cost savings for buyers and sellers of parts in the auto industry.

"B2Bs have a great potential to benefit both businesses and consumers through increased productivity and lower prices," said Robert Pitofsky, the FTC chairman, in a statement. "Of course, as is the case with any joint venture, whether in the traditional or new economy, B2Bs should be organized and implemented in ways that maintain competition."

The commission's approval is hardly a surprise, but the fact that regulators declined to slap any restrictions on Covisint is more interesting, said Jon Ekoniak, an analyst with

U.S. Bancorp Piper Jaffray

. It bodes well for other industries pondering similar B2B exchanges, he added.

"I think a lot of people expected conditions," Ekoniak said. "The three players have such a huge portion of the auto market. Few industries have this sort of consolidated power, so in a way this decision gives the green light to other industries."

Yet the commission, noting that the exchange's founders have such a large stake of the auto market, stressed that it has the right to intervene in the future if antitrust worries surface.

Since Covisint is still at a nascent stage of development and is not yet in operation, "the commission cannot say that implementation of the Covisint venture will not cause competitive concerns," according to an FTC statement.

Still, suppliers apparently are worried that the big automakers, acting in concert, could drive the prices they pay for parts down. That fear, Ekoniak added, could lead federal regulators to scrutinize the exchange's activities over the long term.

Despite concerns that the automakers would be the overwhelming beneficiaries of the emerging Internet marketplace, Ekoniak said, suppliers would be able to slash inventory costs as they gain more information from the major automakers.

Wall Street's reaction to the expected FTC approval was mixed: GM's shares finished Monday regular trading up $1.19, or 2%, at $74.50. But Ford was down 31 cents, or 1.4%, at $26, while DaimlerChrysler closed down 25 cents at $50.