European Commission initiates legal action against Standard & Poor's

Commission launches an investigation into a possible breach of anti-trust rules by S&P

BRUSSELS - Following a complaint filed by several associations representing investors, the European Commission (EC) has started legal action against credit rating agency Standard & Poor's (S&P) over possible breaches of European Union anti-trust rules.

The formal proceedings focus on S&P's behaviour towards end-users of International Securities Identification Numbers (ISINs are a standard developed by the International Organization for Standardization (ISO) to provide unique cross-border identification for global securities). The Commission believes S&P may abuse its monopoly position as the US national numbering agency by forcing financial institutions to pay licensing fees for the use of US ISIN codes in their own databases.

S&P runs the Cusip Service Bureau (CSB) - the US NNA - on behalf of the American Bankers Association (ABA). S&P/CSB is the only US ISIN issuer and the only operator to receive first-hand information from all US securities issuers. S&P/CSB includes the information gathered from securities issuers in a descriptive database, which is then licensed to information services providers. At this stage the US ISINs are the only universal or common identifier for US securities, which are essential for the day-to-day business of financial institutions.

The complaint from the Commission alleges that "an abuse by S&P of its monopoly position by requesting licensing fees from financial institutions located in the EU for the use of US ISINs and certain descriptive elements attached to these numbers each time such an ISIN is used in order to access value-added financial information provided by information services providers. Allegedly financial institutions are obliged to pay for a service that they are not interested in and do not actually use, ie, the S&P's ISIN database. Moreover, it is alleged that S&P forces its contractual partners, the information services providers, to cut off financial institutions from data feeds on US securities unless the latter enter into licensing agreements with S&P for the use of US ISINs."

An S&P spokesman in London said: "The complaint that prompted this enquiry is without merit."

The Commission is keen to point out that the opening of proceedings does not imply it has conclusive proof of an infringement but merely means it will deal with the case "as a matter of priority". There is no deadline for an outcome.