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Friday, September 17, 1999 Published at 19:57 GMT 20:57 UK

Business: The Company File

New auction site to rival eBay

Old-style auctions make way for the web and Microsoft wants in

The online auction site, eBay, faces its stiffest competition to date, as plans to set up a rival auction network are revealed.

Nearly 100 electronic commerce sites will link up, making an item on one site available for bidding on all the other sites. The actual network is to be unveiled Monday and the companies involved in the network include Microsoft, Lycos and Excite.

The company behind the new alliance is software company FairMarket.

FairMarket already sets up and runs auction sites as well as handling billing and customer services.

Virtual warehouse

Chief executive Scott Randall, said the network will function like a virtual warehouse, to which nearly 100 sites will link their own auction.

FairMarket keeps about one third of the fees, one third goes to the site through which the product was bought and one third to the site that offered the product.

The fact that about 100 companies are banding together to take eBay on is a reflection on the success of eBay so far.

With nearly 3.5m auction listings, eBAy is easily the auction leader on the web.

The company's overheads are low, as it brings buyers and sellers together but does not actually handle merchandise. A large portion of its sales translate directly into higher profits, analysts say. The company is now worth $11.8bn ( £7.5m).

Since its flotation last September, the stock has risen from $8.43 a share to a high of $234 in April. EBay shares tumbled $8.44 to $143.31 on the news of a new alliance.

"This ( the new network) definitely raises the competitive stakes for eBay," said Mr Todd Raker, an analyst with Credit Suisse First Boston. "The biggest advantage eBay has had is the embedded base of users."

The new network "basically offers a real threat because it will compile a base of users that will rival the eBay user base," he added.

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