Covisint’s founders said they remain optimistic that the online marketplace will still launch according to schedule on Sept. 30. Daniel Wecker, a vice-president at Commerce One Inc. in Pleasanton, Calif., said the request for more information wasn’t unexpected and added that the “clarifying questions (the FTC) asked will not have an impact on the business plan” for Covisint.
The latest inquiries in the FTC’s investigation of potential antitrust issues involving Covisint have to do with the Detroit-based online exchange’s technology plans, according to Wecker, whose company was brought into Covisint as a software supplier by General Motors Corp. “The FTC wants to know how the technology works,” Wecker said. “There haven’t been a lot of B2B exchanges, and the FTC is trying to build guidelines.”
Covisint originally filed documents detailing its business plan at the request of the FTC in mid-June. By law, the agency had 30 days to either close its investigation or request additional information. FTC officials couldn’t be reached for comment on the matter this week.
The Covisint probe is just one of several proposed online exchanges that are being subjected to antitrust-related reviews by different government agencies. For example, the Department of Justice last month launched an investigation of a business-to-business exchange being set up by six of the nation’s largest meat processors.
In February, GM, Ford Motor Co. and DaimlerChrysler AG halted their individual efforts to develop competing online exchanges and agreed to form Covisint, which potentially could handle as much as US$750 billion in annual purchases for items such as core materials and automotive parts.
Dearborn, Mich.-based Ford brought in Oracle Corp. to work with the GM-backed Commerce One on implementing the underlying software infrastructure needed to run the exchange. Oracle officials weren’t available for comment on this week’s request for more information by the FTC.
So far, the automakers have invested a reported $200 million in the marketplace. But until the FTC decides that Covisint isn’t running afoul of antitrust law, the company can’t open for business.
“We cannot launch without FTC approval,” said Dan Jankowski, a spokesman for Detroit-based GM. “We are continuing to cooperate as the FTC continues their review. When they finish, we fully expect to be given the go-ahead.”
In a related matter, Covisint will lose one of its co-CEOs on Monday: A. Alan Turfe, who was appointed to the co-CEO role by GM, is leaving the exchange to head MetalSpectrum, an online metals marketplace based in Atlanta.
GM officials said they might leave Turfe’s post vacant while Covisint conducts a search for a permanent CEO. Both Ford and Stuttgart, Germany-based DaimlerChrysler also have co-CEOs involved in the venture.
Kevin Prouty, an analyst at AMR Research Inc. in Boston, said Turfe’s departure and the massive infrastructure development tasks that Covisint still faces are bigger impediments to launching the online exchange than the FTC investigation is. “To meet their launch date, they have to have infrastructure and an executive team in place,” he said.