German companies accuse S&P of profiteering | Business| Economy and finance news from a German perspective | DW | 23.04.2012
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German companies accuse S&P of profiteering

A number of German companies have expressed their indignation at alleged plans by the US Standard & Poor's rating agency to drastically increase fees for assessing the firms' economic performance.

Twelve of Germany's largest companies have sent a joint letter of protest to the Germany head of Standard & Poor's, Torsten Hinrichs, expressing their outrage over alleged plans by the US rating agency to force up prices, the Financial Times Deutschland newspaper reported on Monday.

S&P was expected to double some of its fees for the standard assessment of companies' economic performance; the firms concerned say this would be profiteering.

"Even if S&P has offered to stretch the price hike over three years for exactly the same services, the result would remain unacceptable," said the protest note which was signed by managers from Volkswagen, Daimler, Siemens, Bayer, Eon, RWE, Continental, Lufthansa, Deutsche Post, Henkel, Linde and Bertelsmann.

German companies already paid the US rating agencies about half a million euros annually, the letter said. The three main rating agencies, Standard & Poor's, Moody's and Fitch, have been making most of their profits from the rating of individual companies, and not so much from assessing the performance of whole nations - which for them is more a question of image building.

A case for market watchdogs?

Analysts insist the protest letter is also meant as a signal for German and European anti-trust authorities to step into action. German legal expert Torsten Köber told the Financial Times Deutschland that it's not a problem in itself, if a given provider of services - or a group of providers - dominates the market.

"But things are different, if there's any proof of acquired market domination being misused to the detriment of customers, for instance in a bid to force up prices," Köber said.

The dominant position of the three US rating agencies has long been a thorn in the side of European governments, which have sought to set up an independent agency on their own continent. But the attempts made so far have failed to secure enough financial support from banks across the continent.

Even if a European rating agency were to become a reality, it would take many years to build up the solid reputation it would need before it could become a player among equals.

Author: Hardy Graupner
Editor: Michael Lawton