1. 1
STANDARD & POOR
Alfio Shkreta
Ali Baris Sahin

2. 2
Table of Content
• Understanding the product
• What is the product?
• How does it work?
• Allegations
• What is Standard and Poor accused for?
• Putting forth the arguments
• The main arguments against the allegations
• Concluding

3. 3
Understand the
product
International
Securities
Identification Number
systems (ISINs)
Unique identification
method
Debt
securities, bonds, sh
ares etc…..

4. 4
Understand the product
• National Numbering Agencies
• US Securities – S&P
• Crucial in interbank communications
Source: ANNA, European Commission

5. 5
Allegations
• Infringement of Article 102 of the TFEU
• “Any abuse of dominance by one undetaking....shall be
prohibited....when affecting trade between MS”
• Abuse of dominance
• Excessive prices
• Infringement of Article 54 of the EEA Agreement
• Same as Art. 102
• and as a result UNFAIRLY High Fees were set
Source: European Commission

6. 6
Charging indirect users? Why not?
• Intellectual property rights discussion
• Reason for charging indirect users: evaluating the effects
of first sale doctrine
• Discussion as to whether there is an infringment of Art.
102 even if as alleged we do not have intellectual propery
rights

7. 7
IP RIGHT
(CGS)
We do not claim IP rights on ISIN structure but …
We DO CLAIM IP rights on CUSIP code.( local identifier)

8. 8
First sale doctrine
• Example of a fiction author
- Can be reselled, loaned etc.
- Cannot be reproduced.
• What is the difference in our case? (Tait, 2009)
- We do not charge indirect users if they are using read
only format.
- We charge them if our database is reproduced for them.

9. 9
Assumption of lack of IP Rights
• Would be transferring what we do not own.
Thus: Licence contracts would not be valid.
Thus: No legal basis of received fees.
Thus: End users have a restitution claim based on unjust
enrichment.
Thus: They can get the fees they have paid back.
What is your problem? Whose welfare is damaged?

10. 10
Where is the abuse?
• Abuse of dominace?
• Hoffman-La Roche (1979)
• Restricting competition
• System of rabtes
• Informations assymetry
• Michelin (1983)
• Discounts offered
• Discriminatory nature of offers
Source: European Commission

11. 11
……..
• So clearly the Hoffman – La Roche (1979) and Michelin
(1983) fail to apply to us
• The benchmark of abuse of dominance is undermined
• Natural monopoly
• Economies of scale
• Patent
• Tacit knowledge
Source: European Commission

12. 12
Price analyses, anywhere? Nowhere!
• Excessive Pricing???????
• Chiquita (1976)
• Detailed business operating analyses
• Conditionig retailers use of product
• Welfare analysis
• ECJ “The Commission has failed to analyze the cost structure
of the company”
Source: European Commission

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3 unanswered questions…………….
• What is our cost?
• What is our margin?
• What is our unfair profit?

14. 14
Cost recovery principle
• Under ISO 6166 – NNA must charge enough to cover
distribution costs
• This condition applies when CUSIP is considered a public
good
• “CUSIP Global Services is unique among national
numbering agencies in serving a dual role. It’s not only a
numbering agency, but also a commercial – aka for-profit
– data vendor. Most other numbering agencies are owned
by either exchanges or securities depositories”.
Source:

15. 15
Cost recovery principle cont’d
• Lack of harmonization in categorizing goods
• European Commission treats this good differently
• Article 106 of TFEU “In cases where a measure of a member
state is not in conformity with stated rule, EC address decision
to Member States” (Slaughter and May, 2011)
• Out-reach of the EC
Source: European Commission

16. 16
Suing the wrong party
• CUSIP intellectual property rights owned by American Bankers
Association
• Standard & Poor manages such a product. (ABA)
• Same in the Bond Dealers of America’s letter to SEC ((Bond
Dealers of America, 2010)
• Therefore it follows ABA policies
Source: American Bank ers Association

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Wrapping it up
• Failure to apply Article 102 of TFEU
• Un-sustained allegations
• Inability to provide a thorough financial analysis
• Immediate dismissal of claims!!!

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References
• ANNA: http://www.anna-web.com/index.php/home/isinsaiso6166
• American Bankers Association:
http://www.aba.com/Products/Pages/PS_CUSIP.aspx
• Bond Dealers of America: http://www.bdamerica.org/wp-
content/uploads/2010/12/CUSIP-SEC-Letter-FINAL-IAA-GFOA-BDA-111010.pdf
• CUSIP Global Services: https://www.cusip.com/cusip/about-cgs-identifiers.htm
• Slaughter and May: http://www.slaughterandmay.com/what-we-do/publications-
and-seminars/publications/client-publications-and-articles/a/an-overview-of-the-
eu-competition-rules.aspx
• Standard and Poor's: http://www.standardandpoors.com/products-
services/main/en/us
• Reese, R. A. (2003). The First Sale Doctrine in the Era of Digital Networks. The
University of Texas School of Law Public Law Research Paper No. 57; Law and
Econ Research Paper No. 004, 585-592.
• Tait, N. (2009, November 19). Financial Times:
http://www.ft.com/intl/cms/s/0/ed9d69a0-d528-11de-81ee-
00144feabdc0.html#axzz2DNcfcQd9
• http://europa.eu/rapid/press-release_IP-11-1354_en.htm
• http://eur-
lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:12008E102:EN:HTML