When Moody’s Investors Services and Standard and Poor’s Financial Services announced hefty price increases last fall, they provoked a revolt among German companies that threatens to embroil them in an open price war.
Hanover-based auto supplier Continental fired the first shot – taking an action never done before by a member of Germany’s DAX stock market index. It showed Moody’s the exit door over complaints its price was too high.
It was the first time New York-based Moody’s lost a contract with a DAX company, but not the last. Kassel-based fertilizer company K+S Group joined the budding rebellion by canceling its contract with Moody’s, saying the firm was just too expensive.
Now, the insurrection against the two American giants is spreading. Handelsblatt has learned the electric utility company Eon in Düsseldorf and the energy firm RWE in Essen also are considering a move. Both Moody’s and S&P face a growing chorus of loud complaints about what German companies describe as outrageous pricing policies.
The seeds of revolution were sown more than two years ago, when a group of German chief financial officers representing 12 large companies sent a letter to S&P complaining about a fee proposal from the ratings agency that would double the prices charged for the information it gathers. The financial officers were united in declaring the rate hike “completely unacceptable.”
S&P shrugged off the complaints with no major concessions and began collecting the higher fees in November 2012, even though Bonn-based Deutsche Post and HeidelbergCement decided to cancel their contracts.
Initially, Moody’s was not targeted, but the financial officers made clear that their unhappiness with high costs also extended to Moody’s. Both American companies were described as dictating their rates, not negotiating them.