British regulator may open market dominance probe

BRITAIN’S antitrust regulator is to decide this month whether to open a probe into market dominance by the “big four” accounting firms, focusing on bank loans that force borrowers to use the largest auditors.

A House of Lords committee investigating the financial crisis said in a March report that the firms, which audit 99 of the 100 largest British companies, should be probed by the Office of Fair Trading (OFT) to determine whether their market dominance wrongfully limits choice.

The OFT would help determine whether loan terms unfairly favour Deloitte, Ernst & Young, PricewaterhouseCoopers and KPMG, said Robert Bell, an antitrust lawyer in London with Speechly Bircham. The agency, which has kept the industry under review since 2002, will make a decision on the probe later this month, said spokeswoman Kasia Reardon.

“The requirement by banks to use one of only four accounting firms does suggest there’s some restriction or distortion of competition,” Mr Bell said.

“Whether that can be objectively explained away is something they would be looking at.”

An investigation by the OFT would “bring to a head the long-running debate on competition and choice,” said Mark Hamilton, a KPMG spokesman.

The other auditors also said they would cooperate with any probe.

Ernst & Young will cooperate with any investigation, said spokeswoman Sarah Jurado. Deloitte and PwC said in statements that they support an investigation into the existence of restrictive banking covenants.

The loan covenants, one of several practices highlighted in the government report, require borrowers use one of the four firms to review their books in light of their international reputations and perceived ability to handle complex reviews.