Buffett’s Business Wire Calls Nasdaq Fee Hikes Anti-Competitive
December 4, 2009
Business Wire, one of the top two distributors of official news and information from public companies, recently submitted a letter to the Securities and Exchange Commission saying listing fee hikes proposed by Nasdaq OMX Group will be used to subsidize other services, including its GlobeNewswire service, with which it competes.
Business Wire contends that subsidization would be anti-competitive.
Nasdaq OMX Group has proposed revising and increases several types of fees to apply for and maintain listings on its Nasdaq exchange in the United States, including a annual fee that will levy an additional $5,000 annually on approximately 75% of its listed companies and fee increases applicable to listing ADRs that will range from $8,775 to $20,000.
Business Wire alleges that Nasdaq seeks the fee increases to cover unspecified cost increases while it is attempting to attract new listings “by offering millions of dollars in ‘free’ information dissemination services bundled into the listing fee.”
One of those services is GlobeNewswire, which Nasdaq acquired in 2006. GlobeNewswire competes with Business Wire in putting out press releases, investor communications, photos, and regulatory filings for publicly traded companies.
But BusinessWire and PR Newswire are the giants in the field, splitting more than 80% of the market. BusinessWire is a wholly owned subsidiary of Berkshire Hathaway, the corporate holding company headed by billionaire Omaha investor Warren Buffett.
The next biggest competitor is MarketWire, leaving GlobeNewswire with a tiny share, according to Erica Iacono, editor of PRWeek, an industry trade publication. Business Wire says that Nasdaq only identifies two initiatives--improvements to its website and the creation of its IPO cross to improve transparency--to warrant the increases in the fees it charges.
Roughly 3,800 companies pay the ongoing fees to list their stocks on the Nasdaq equities exchange in the United States. Nasdaq reported 33 new listings in the third quarter—paying application and entry fees—of which seven switched from the New York Stock Exchange, 12 stemmed from IPOs, nine from OTC upgrades, and the remainder from ETFs and other structured products.
Business Wire’s letter highlights Nasdaq’s proposal to increase by 500%, to $25,000 its application fee for getting listed. Nasdaq notes in its proposal, however, that the application fee would continue to be credited against entry fees, which are paid when the company is actually listed. So, it says, the change “would not affect the overall fees a company pays to list …”
Business Wire says the fee increases are “apparently intended to help subsidize” ancillary services that it bundles into its listing service to lure companies away from rival exchanges. “Business Wire strongly believes the public interest would be best served if either the Justice Department or SEC investigate this before the SEC rules on Nasdaq’s proposal,” said Roger Myers, attorney for Business Wire and partner at Holme Roberts & Owen LLLP.
The comment letter was also sent to the Justice Department’s anti-trust division. Myers declined to comment further on the issue. “In one case, a Nasdaq Executive Vice President offered a major Business Wire client up to $1 million of free information dissemination services for five years, including enough free annual dissemination via GlobalNewswire to more than cover all the company's wire distribution, if the company would switch its listing from the New York Stock Exchange to Nasdaq,” the letter states.
