Identify the key points in this case. What is the hidden agenda?

Omnexus


The case involves five large plastics manufacturers amalgamating to form an online market for their produce. Through offering a concoction of the differing attributes and resources from each of the founding members it was hoped to expand the retail division, opening up the market to potential customers where previously there existed no service that satisfied their needs.

It was conceived as a neutral marketplace to remedy the inefficient way the plastics industry had operated previously. Moving online, the administration function could be dramatically revitalised reducing the input required from counterparties to the transaction. The quest for a suitable material was also made significantly more straight forward, through browsing capabilities and ease of comparisons.

The work of the founders was not entirely onerous, there existed motivation not directly interoperable that lead them to undertake such a cooperative venture. The project was not solely implemented by the plastics firms; there were many other organisations that had a significant hand in its development. One of the partners was Accenture, formerly Anderson consulting. They muscled themselves into this role pushing out McKinsey & Company shortly after their appointment. Although the critics to this appointment were effectively fobbed off stating that Accenture were the recognized global leader therefore better placed to develop the e-market. Possibly amidst all the collusion, a malleable ally was required to choreograph the unison. Anderson, prior to it collapse under contentious circumstances, may have served a selection of the founding suppliers. This lucrative relationship may have been hoped to have extended through Omnexus.

A further, more complex web of interrelations developed. IBM was also heavily involved in facilitating trade through the e-market. IBM had external ties with Ariba (a rival software company) that were contingent upon the success of Omnexus; while Ariba also had influence over the technological design of the site. The culminated in a family of organisations with both the incentive and capability to scratch each others back. These affiliations did not end here, as the conglomerate nature of Omnexus quickly emerged as it established trade relations with Chemcross and Conferos, similar plastic procurement sites operating in other regions. These mergers were conditional that Omnexus was granted more trade having rapidly tapped into the global market

The site focused only on one division of the Thermoplastic Polymer Processing Market; Injection and Blow Molding which accounted only 25% of the revenue generated by the industry. Whilst it may have been necessary to start on a manageable scale, no significant developments were to be observed thought the entirety of the case. Once again a convincing argument was proclaimed, referencing the significant growth experienced in the US markets. Maintaining my scornful perception, this rationale may too have been tainted as all of the factors above imply an underlying collusion objective. Were it the case that this sector of the polymer market displayed the most pronounced competitive tendencies, then the main suppliers may seek to combine their efforts in a more proactive way, to restrain the antagonism towards each other, through discrete use of price controlling, potentially?

Further entry to supplier status, was restricted, initially by the suppliers themselves. Those who had yet to cotton on to the plan, perceived that participation
“would result in greater price transparency”. Within the year a further nine suppliers were added to the consortia further emphasising the existence of a perfect market. This facet was not taken at face value by many however; comprehensive assurances had to be made to silence the scathing “anti” trust voice.

Concerted efforts were aimed at retaining the independence of Omnexus’s board, which coincidentally consisted of a member from each of the founding suppliers. This created a cosy environment, and plausible alibi for covert discussions to take place before a limited audience.

“Legal counsel had to be present whenever the founding members were in the same room because topics regarding pricing or other consortia related conversations were sure to arise.”

While controls were in place to combat the oligopoly powers from reaching mutual consensus I do not imagine that the presence of minders inhibited discussions completely. A monopoly outcome was advantageous to every one of the suppliers, why else would they actively try to integrate their functions indiscriminately under a single banner? The costs savings addressed in the sales pitch predominantly benefited the buyer. I could see little legitimate reason that would encourage the distributors to pool their efforts in the way that was observed.

While the site appeared to get of the ground without much distress, the Federal Trade Commission is bound to be keeping a watchful eye over future developments.