Labor asks ACCC to investigate big four accounting firms
Labor has asked the competition watchdog to investigate the big four accounting firms for "cartel-like behaviour," after a parliamentary hearing heard the present and former bosses of the companies held at least two private dinners in the past two years.
Between them, PriceWaterhouseCoopers, KMPG, Deloitte and EY have received more than $1.7 billion in federal government contracts in recent years. A recent auditor-general's report and an ongoing inquiry into government procurement has revealed former and current chief executives had regular catch ups, but the companies maintained they competed for contracts.
Shadow
assistant treasurer Andrew Leigh and deputy chair of the joint standing
committee of Public Accounts and Audit Julian Hill have written to
Australian Competition and Consumer Commission boss Rod Sims to lay out
their concerns about the market power of the accounting and consultancy
firms.
Consulting services to government are increasingly procured from the "big four" accounting firms, the MPs wrote. The Labor MPs believe less consulting and contracting work is going to small and medium sized businesses than previously believed.
"One
of the related issues is the reported difficulties for SMEs in
accessing consulting and contracting work for government and potential
risks to competition in the tendering and distribution of such work."
The letter cites overseas scandals related to the firms, including the decision by the UK parliament to ask the country's competition watchdog to investigate the structure of the market there.
At a recent
hearing, the big four companies were grilled on how they addressed
internal conflicts of interest between the arms of the business
responsible for financial auditing and that responsible for consulting
to companies and government departments.
In the letter, the MPs asked Mr Sims if the allegations raised in news reports and at the hearing are enough to warrant an investigation into "cartel-like behaviour" by the watchdog, or if an investigation has already begun.
The letter cites overseas scandals related to the firms, including the decision by the UK parliament to ask the country's competition watchdog to investigate the structure of the market there.
"Like
the UK however, concerns exist regarding perceived internal conflicts
of interest between the traditional auditing function vs. the faster
growing and profitable consulting service market."
In the letter, the MPs asked Mr Sims if the allegations raised in news reports and at the hearing are enough to warrant an investigation into "cartel-like behaviour" by the watchdog, or if an investigation has already begun.
Dr Leigh and Mr Hill also ask for a public explanation if the ACCC chooses not to make further inquiries.
Mr Hill said he and Dr Leigh wrote to the ACCC before the joint committee's inquiry handed down its report due to the "quite stunning admissions or lack of response and the subsequent media reporting".
"Public confidence in the big four is absolutely critical to the Australian economy and the wider capital markets because of their financial statement auditing functions," he said.
Mr Hill said he and Dr Leigh wrote to the ACCC before the joint committee's inquiry handed down its report due to the "quite stunning admissions or lack of response and the subsequent media reporting".
"We felt that it warranted the ACCC's attention and consideration," he said.
Questions
around the private dinners were justified by fines dolled out to the
Italian arms of the companies totalling 23 million euros for collusion
on government contracting, Mr Hill said."Public confidence in the big four is absolutely critical to the Australian economy and the wider capital markets because of their financial statement auditing functions," he said.
"In
that context discussions with regulatory and professional bodies are
perfectly sensible but I can understand public questions or concern
regarding private dinners between businesses, which in the UK have
described themselves as an oligopoly."
A spokeswoman for the ACCC said "competitors are not precluded from meeting or talking with each other, and without further details about specific concerns we're not able to comment further".
A spokeswoman for the ACCC said "competitors are not precluded from meeting or talking with each other, and without further details about specific concerns we're not able to comment further".
The boom in the use of consultants in the public sector has been a source of ongoing controversy, with Labor already announcing it intends to slash spending on contractors if it wins government.
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