OPCIONES DE TRATAMIENTO PARA EL DOLOR CRÓNICO

According to Dabbah (2010) a merger occurs through amalgamation, the gaining of operational control or the establishment of joint ventures. Some of the reasons why firms merge include the drive to become more efficient, to consolidate market position and to leverage competencies and external resources (Haberberg and Rieple, 2008). Correspondingly, Walter (2004) describes mergers as strategic alliances and enlists the search for financial efficiency as one of the value gains. In a similar vein, Graham and Harvey (2001) attest that companies with financial flexibility engage in expansion through acquisitions as they invest for growth.

The literature on credit rating and mergers encompasses studies on how credit quality influences merger agreements and the preferred payment methods when rated firms acquire other firms27 _{(Karampatsas et al., 2012). However, the current}

study and review concerns itself with mergers as they relate to competition and new entrants in the credit rating industry.

To begin with, the ‘Big Three’ expression is deep-rooted and synonymous with the rating industry. Nevertheless, the recognition of Fitch in the financial services arena is relatively recent and only transformed a definite duopoly into an oligopoly in the last fifteen years (Alcubilla et al., 2012). Fitch’s market recognition has been achieved in no small way by merging with and acquiring smaller and fairly

76 recognised agencies. In 1997 it merged with IBCA and in 2000 it absorbed Duff and Phelps and Thomson Financial BankWatch, all of which had some degree of market recognition and client base (Fight, 2001). The merger with IBCA proved to be a masterstroke as it enabled Fitch to gain a firm foothold in the European market. Dittrich (2007:96) asserts that the case of Fitch shows that it is possible to gain recognition in the market by using the strength of a conglomerate to operate under a prominent brand name; this recognition ‘results from the combination of the different reputations in special segments’. Moody’s and S&P have also embarked on serial mergers and acquisitions to extend their geographical spread (Petit, 2011).

Clearly, there has been a strategic drive by leadings CRAs to target budding CRAs or providers of risk management solutions to reinforce their market positions especially overseas but these alliances may have anticompetitive and antitrust effects when they reduce the number of industry players. As such, Darbellay (2013) suggests that regulators have a role to play in enacting competition laws and the deployment of competition policies whilst recognising the distinction between laws and policies. Indeed, laws are set legal frameworks while policies are procedures that affirm competition laws (ibid). Dabbah (2010) asserts that the pillars of enacting competition laws should be the moderation of anticompetitive agreements, curtailing the abuse of a dominant market position and the control of mergers as explained below.

Firstly, by the moderation of anticompetitive agreements, Dabbah (2010) insinuates the horizontal brokering of deals between firms in the form of price-fixing, market

77 sharing and possible restriction of output. Secondly, in possessing market control, the abuse of a dominant market position can arise when firms use their supremacy to act in unilateral ways that affect the competition (ibid). Lastly, the control of mergers focuses on the prevention of concentration in the first place so that amalgamations do not limit new entrants (ibid). Dabbah (2010) concludes that a combination of competition laws and competition policies are necessary to temper market power in specific sectors. In the same way, Darbellay (2013) believes that the credit rating industry is one such special sector where competition laws and policies need to be sanctioned in light of CRAs’ role as a quasi-regulator.

Furthermore, as quasi-regulators, Petit (2011: 594) believes that ‘CRAs exhibit prima facie features of significant market power (SMP), which is the main target of antitrust policy’. Hence, ‘firms holding SMP can profitably set prices at levels that significantly exceed costs’ (ibid). The danger of SMP is that it threatens ‘economic welfare and in particular consumer28 _{welfare’ (ibid). With economic welfare at stake,}

due to SMP, Petit (2011: 607) laments that ‘stakeholders have been remarkably coy when it comes to antitrust intervention’ and ‘very few competition-related remedies have been discussed’ in relation to ‘the comparative merits of competition enforcement’ (ibid:608). As ‘antitrust law only bites in the presence of an additional behavioural element’ (ibid: 612), it could be said, at the least, that the absence of antitrust intervention in the rating industry is due to the lack of hard evidence of anticompetitive behaviour.

78 Therefore, in Europe, the provisions of the Treaty on the Functioning of the EU (TFEU) outline two types of anticompetitive behaviours that can activate antitrust intervention. Firstly, article 101 of the TFEU bars any form of collusion among independent players. Secondly, article 102 of the TFEU proscribes any abusive conduct by the dominant players (Chalmers et al., 2014). Thus, ‘a prerequisite for antitrust intervention in the credit rating industry is the existence of a course of conduct which fulfils the conditions of application of article 101 or 102 of TFEU’ (Petit, 2011:613). However, it is ‘extremely difficult to review the various activities of CRAs that may be tantamount to competition law offence’ (ibid). In other words, antitrust intervention can only be initiated when antitrust liability has been proven by hard evidence of market limiting practices by incumbents.

Notwithstanding, articles 101 and 102 offer scope to challenge the assertion of Dittrich (2007:138) that ‘one has to accept that the credit rating industry is framed by exceptionally strong forces hindering competition’ because ‘it is natural oligopoly at best’ (ibid). Mergers with antitrust concerns may not constitute natural or exceptional forces as White (2010) affirms that mergers among new entrants have caused the rating industry to revert to the status quo of three key players as was the case before NRSRO legislation in 1975.