Commission sends statement of Objections to Standard & Poor’s

On 16 November 2009 the Commission sent a Statement of Objections (“SO”) to Standard & Poor’s (“S&P”), a division of McGraw-Hill Companies, Inc.  The SO follows a complaint lodged by several associations representing investors (financial institutions and asset managers) with the Commission.

S&P is the sole-appointed National Numbering Agency for U.S. securities and therefore the only issuer and first-hand disseminator of U.S. International Securities Identification Numbers (“ISINs”).  ISINs are the global identifiers for securities and are governed by International Standardization Organization (“ISO”) standard 6166.  Financial institution cannot carry out a number of operations without ISINs, which are indispensible. Furthermore, ISINs cannot be substituted by other identifiers for securities.  Moreover, S&P is the only operator to receive first-hand information from all U.S. securities issuers. S&P includes the information gathered from securities issuers in a descriptive database (“the S&P ISIN database”), which is then licensed to information services providers such as Bloomberg, Reuters, etc.

The Commission’s preliminary view is that by requiring financial institutions and information service providers to pay licensing fees for the use of ISINs in their own databases, S&P is abusing its monopoly position. The enforcement of the payment of these license fees by S&P would amount to unfair pricing in breach of Article 102 TFEU.

This preliminary finding is based on, among the other, a comparison with the charging policy of other national numbering agencies that either do not charge any fees at all or, if they do, do so only on the basis of the distribution cost as opposed to usage, according to ISO principles.  Yet, it appears that S&P does not incur any costs for the distribution of U.S. ISINs to financial service providers because the latter do not receive the ISINs from S&P but from information service providers such as Thomson Reuters or Bloomberg.

S&P has 8 weeks to reply to the SO, and will then have the right to be heard in an Oral Hearing. [Gabriele Accardo]