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SPEECH/01/179

Erkki LIIKANEN

Member of the European Commission responsible for Enterprise and the Information Society

"E-marketplaces: new challenges for enterprise policy, competition and standardisation"

Workshop "E-marketplaces: new challenges for enterprise policy, competition and standardisation"

Brussels, 23 April 2001

Ladies and Gentlemen,

I am impressed by the great interest in this Workshop. This demonstrates not only the relevance of the topic of B2B e-marketplaces, but also the interest in enterprise and competition policy as major instruments to support their openness and accessibility.

This Workshop is a follow up action of the GoDigital initiative. The aim of this initiative is to help SMEs to use ICT and e-business more widely and efficiently. To this end, an information campaign has been launched by the Commission, in co-operation with Member States, regional centres and business associations.

But e-business is not only a challenge for SMEs. It is also a challenge for governments and for policy makers. They also have to "go digital" and adapt policies to the challenges of the e-economy.

So far, the policy debate has mainly focussed on legal and regulatory issues. This was necessary in order to create an internal market also for information society services. In this respect, we have made good progress.

The new challenge is that efficient e-marketplaces can be developed in Europe. This will give another boost to the internal market, with even more choice and competition. But whereas the internal market was mainly completed by legal harmonisation and mutual recognition of national laws, e-marketplaces will be shaped mainly by the market, by business services, standards and new rules of the game.

  • The objective of this Workshop is to discuss the future agenda for enterprise policy in response to the new challenges, posed by e-marketplaces. The keywords here are "openness" and "interoperability". This can be best ensured by open standards. But also by the strict application of competition rules - and by actions to help SMEs to be part of the new e-marketplaces.

  • This Workshop should help the Commission to better understand the policy requirements associated with the establishment of e-marketplaces, in particular with respect to standardisation. Clearly, standards are voluntary and market-driven. But Enterprise policy may help to establish open platforms for consensus-building, thus accelerating the creation of efficient e-marketplaces in Europe.

On the other hand this is an opportunity to learn and discuss key policy issues related to the creation of e-marketplaces with the Commission services. This Workshop has been organised by DG Enterprise, in co-operation with DG Competition. We can therefor cover many different areas including standardisation, competition rules and actions to help SMEs to fully participate in e-marketplaces.

I hope that an open discussion would help in shaping future policies in support of e-marketplaces. This should be our main objective today, not so much questions linked to technology or promotion of specific market solutions.

B2B as the main driver

B2B is the main driver of e-business. B2B is where the real business is, bringing together old and new economy. B2B stands for reduced purchasing and procurement costs, reduced time-to-market, improved product and service quality, and higher productivity. Therefore, B2B is part of the normal process of re-engineering companies, with the view to reduce cost and to improve competitiveness.

This process will continue, despite the burst of the dot.com bubble. Companies will always look for improvements, and e-marketplaces offer many of them. Marketplaces are considered as one of the most important features of B2B e-business. It is estimated that more than 3.000 e-marketplaces will be created in the next years, across all sectors. However, not all of them will economically survive.

  • Jupiter MMXI, for example, predicts that fewer than 100 e-marketplaces will survive out of the 500 existing today. The three key success criteria are: a high volume of transactions, the backing of industry leaders, and the integration of online offerings with offline services, such as full telephone service and local customer support.

  • E-marketplaces can take many different forms, from company exchanges to multiple platforms, bringing different e-marketplaces together. However, in all cases the former dream of "frictionless" transactions is no longer alive. The establishment and maintenance of such e-marketplaces takes much time and an in-depth knowledge of the specificities of the sector. This clearly is not the easiest way to get rich soon.

  • Clearly, all the "middlemen" are not dead, as predicted some years ago. To the contrary, ICT services are among the fastest growing market segments. Technology alone will not bring together buyers and sellers. This is as realistic as the idea of a paperless office.

The first session will further discuss these issues. This will set the scene for the next sessions which will look more specifically into the enterprise and competition policy aspects.

Standards have to play a role, but which?

E-marketplaces bring together buyers and sellers, thus creating virtual markets. In order to make this happen, companies must work very closely together, using compatible systems and, as far as possible, business practises.

What started years ago with EDI, needs now to be extended to the Internet. Only if the SMEs are also fully integrated into e-marketplaces, will e-business become the norm. And only then will the potential benefits of e-business be fully reaped.

In reality, SMEs will have no other choice than to follow the big market players. As great as the fear of lock-in to specific technological solutions is the fear of being locked-out. Standards have the potential to ensure interoperability and to reduce the risks to investments in new technologies.

In ICT, incompatible applications are, however, more the rule than the exception. And a specific e-marketplace established by one service provider may not necessarily be compatible with another e-marketplace, running on different software. The question is which degree of incompatibility must be accepted and what can and should be changed.

E-marketplaces strongly depend on the availability of standardised solutions. Products have to be clearly defined and classified in order to facilitate online ordering. In most areas, the necessary standards for products are in place. The investments made into the internal market will even be more valorised by the Internet.

However, the question arises whether the existing product standards fully respond to the modern requirements of logistics, tracking, billing, etc. And who is preparing for electronic catalogues, preferably available in more than one language?

The success of e-marketplaces will require more than technical interoperability. Trust and confidence are also a prerequisite for doing business in the digital environment where companies will frequently trade with new and unknown partners, often across national borders.

Many different trust marks and seals are currently being developed to address this problem. How to know whether the promises on paper match the reality? Here, standardisation and certification may play a useful role, not only to standardise the content of such codes of conducts but to ensure better transparency between them.

The European Standards Organisations, CEN, CENELEC and ETSI, have given their full support to the eEurope Action Plan. Standardisation work in the field of electronic signatures will, for example, certainly help to implement the Electronic Signatures Directive. This is an excellent example of an alternative regulatory approach.

Also for design for all and for e-learning, standardisation is very relevant to bring the Information Society to citizens. And I don't have to explain to this audience the prominent role ETSI has played in promoting mobile telephony in Europe, through GSM and lately UMTS.

Therefore, European Standards Organisations play an important role also in ICT, as they have contributed to the completion of the internal market. But what will be the future role of standardisation in e-marketplaces?

Such marketplaces will be built upon a broad consensus among economic actors, with the view to sharing the same technical platforms and business models. What needs to be standardised and by whom? These are the critical questions.

It may well be that a competitive approach towards standardisation will result in a lack of interoperability and thus slowdown the creation of efficient e-marketplaces in Europe. The need for commonly used standards is certainly given, but can the European Standards Organisations deliver the results which are demanded by the market? This is another question to be discussed.

Standardisation only works if there is enough common ground. This is theoretically the case for e-marketplaces but it still needs to be observed how this general interest in common solutions can be translated into real commitments to share the same platforms and business practises.

Co-operation is needed - but competition as well

Certainly, e-marketplaces depend on co-operation and mutual trust. But at the same time, many fears about unfair trading practices in B2B marketplaces are expressed. These concerns centre on the issue of anti-trust. The openness of the new marketplaces means that businesses can benefit from increased collaboration. But this openness also means there is much greater scope for the leaking of confidential information.

Some commentators have expressed the fear that e-marketplaces could be the "smoke filled rooms" of the future, where sensitive information between competitors could be exchanged. In addition, the potential risk of price fixing and other anti-competitive behaviour has been acknowledged.

The Commission is increasingly called upon to assess the competitive impact of e-marketplaces. These marketplaces are created in a number of different sectors, and can fall under the Merger Regulation or under the general antitrust rules (Regulation 17). What can be said, at this stage, about the policy line followed by the Commission?

  • The Commission has already assessed and cleared a number of e-marketplaces in a wide variety of industries. Examples range from electronic markets for aircraft components (MyAircraft.com UTC/Honeywell/i2) over foreign currency options (Volbroker.com Deutsche Bank /UBS /Goldman Sachs /Citibank / JP Morgan / Natwest) to office equipment (emaro.com Deutsche Bank/SAP).

  • Nevertheless, the competition assessment of e-marketplaces is still evolving. The Commission will need to analyse carefully the workings of any proposed B2B trading system and its effects on the market. This assessment will need to take account of both the possible benefits and the possible competition concerns raised by e-market places.

It is widely assumed that B2B electronic markets can have important pro-competitive effects. They potentially increase market transparency and contribute to a further integration of separate geographic markets.

In addition, e-market places are expected to be a source of substantial efficiencies, as they should allow a reduction in transaction costs and an improvement of inventory management. Nevertheless, the quantification of these benefits is currently difficult and many claims as to their size seem to be exaggerated.

This Workshop can not give answers to all open questions. But it can raise some of them, not only from a competition policy perspective but also from a business perspective. Important questions to be further discussed are:

  • What will be the impact of e-marketplaces on prices? Who will be the "losers" in the value chain and how will they react?

  • How strong are network effects in e-market places? How many market places are viable in a given industry?

  • How relevant are joint purchasing and joint selling for the attainment of the benefits that e-marketplaces promise?

  • Should one insist on open, non-discriminatory access to all e-marketplaces? What is the right strategy to follow?

I am sure that these questions will trigger a lively debate tomorrow. Colleagues from DG Competition will be present to answer to your questions. Therefore, there are very good reasons to participate also in the second day of this Workshop. This is in particular the case as also standardisation can raise competition concerns.

How to ensure an effective participation of SMEs?

The potential benefits for companies trading in B2B are clear. For buyers and sellers, B2B marketplaces offer more transparency and expanded markets. This goes, however, hand in hand with more competition. Therefore, there will not only be winners but also losers. A new culture of efficiency will emerge from e-marketplaces, leaving only little room to hide inefficiencies and lack of quality.

The question for Enterprise policy is: How to help SMEs to "go digital"? Here, the key word is "entrepreneurship". Companies must prepare themselves to participate in e-marketplaces and to be an accepted partner in them. Enterprise policy can only help to raise awareness and to improve access to markets.

The recently launched GoDigital programme aims at tailoring the e-Europe initiative to the specific needs of SMEs. The aim is to help SMEs to use the Internet more and better.

Of course, the actual decision to "go digital" is always a matter for companies themselves. For the vast majority, there is not even a choice pressures from competitors, and notably from global competitors, will make it a must.

Enterprise policy can help SMEs to take the right decision and to make it easier to participate in e-marketplaces.

There are some proposals that I wish to share with you:

  • Firstly, we need to make sure that SMEs have sufficient information to start with e- business. General awareness is good. SMEs, like everybody else, read the press. ICT vendors and consultants are also doing their jobs IT and e-business consultancy is one of the fastest growing sector in Europe. The challenge for SMEs is to make changes happen to move from general awareness to business decision.

And here, business associations such as the Chambers of Commerce - have a key role to play in spreading best practices, and helping SMEs make the right choices. Not only in technologies and equipment. This is the easy part. But also in developing the right strategies for the e-economy.

The Commission is prepared to support regional and sectoral events which bring SMEs together to discuss the e-economy. Regions, European associations and the ICT industry are encouraged to talk to SMEs. Also the Euro-Info-Centers play a prominent role in informing SMEs not only through awareness campaigns but even more importantly through help desks and the provision of practical information.

  • Most Member States and many regions have developed their own strategies for promoting e-business. A variety of instruments have been devised, some of them highly successful (e.g. new enterprise "clusters"). Ireland is a good example of successful initiatives in that area. Now, we should assess what works best, in which conditions and what can be learned from the experience.

Best practice needs to be aired and shared, to benefit the greatest number. This is about creating the necessary network effects of the e-economy. Clear targets should be fixed to measure and to benchmark the results of the various programmes and experiences. Member States have already signalled their readiness to work together with the Commission in this area.

  • Finally, there is a need for more reliable data on the take-up of e-business by SMEs. Some sectors of the economy will be totally transformed by e-business, such as sectors highly dependent on information and "knowledge" (e.g. digital content, logistics, distribution). Other sectors may be less directly affected, but there can still be advantages in going digital. We have to understand what we are talking about, in order to design effective policies.

This Workshop should help us to validate the GoDigital initiatives and to identify new policy targets, to be addressed by Enterprise policy. What needs to be done? And how and by whom? On these questions my services are waiting for your suggestions.

Conclusions

Let me briefly summarise the main questions:

  • First, what is the role of standardisation in building e-marketplaces? To what extent is competitive behaviour useful in the area of standardisation? How can European standardisation accelerate the creation of e-marketplaces and foster trust and confidence?

  • Second, what are the risks of e-marketplaces with respect to competition. Are the existing competition rules sufficient to address them?

  • Third, how to ensure an effective participation of SMEs in e-marketplaces? Are awareness building and benchmarking enough or are new tools needed to better prepare SMEs for the e-economy? And if, how to implement them?

These are my key questions. I would be glad to receive your suggestions.


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