Concerns have been raised about the level of competition among CRAs. Some scholars and market participants contend that competition still exists despite the oligopoly of the Big Three. Other scholars argue that there is insufficient competition since well-established CRAs keep their market shares despite their poor rating performance. Some refer to an absence of competition in the rating industry. Others suggest that the impact of increased competition would be problematic. Few assert that there is competition, yet competition affects ratings and should not be a regulatory target. Disparate opinions exist concerning the level of and need for competition, and researchers have recently shown an increased interest in the topic. This academic work focuses on the causes and consequences of the competitive concerns in the rating industry. CRAs operate in an oligopolistic market that offers limited incentives to compete on quality ratings. Since the first CRA was founded at the beginning of the twentieth century, the same three leaders – Moody’s, Standard & Poor’s and Fitch – have dominated the industry. The question arises as to whether CRAs are driven by private market forces. As regards market structure, there is no doubt that the rating industry is heavily concentrated. Of the Big Three, the most dominant CRAs are Moody’s and Standard & Poor’s since they controlled 83 percent of the US rating market as of December 31, 2011. Some speak of a duopoly of these two CRAs. The third leading CRA Fitch is also significant, hence reference to an oligopoly.
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