Bloomberg Anywhere Remote Login Bloomberg Terminal Demo Request


Connecting decision makers to a dynamic network of information, people and ideas, Bloomberg quickly and accurately delivers business and financial information, news and insight around the world.


Financial Products

Enterprise Products


Customer Support

  • Americas

    +1 212 318 2000

  • Europe, Middle East, & Africa

    +44 20 7330 7500

  • Asia Pacific

    +65 6212 1000


Industry Products

Media Services

Follow Us

‘Big Four’ Audit Firms May Face U.K. Antitrust Probe This Month

Britain’s antitrust regulator said it will 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 U.K. House of Lords committee investigating the financial crisis said in a March report that the firms, which audit 99 of the 100 largest U.K. companies, should be probed by the London-based Office of Fair Trading to determine whether their market dominance wrongfully limits choice. The probe could be the most high-profile for the agency since it investigated banks’ equity underwriting practices -- an inquiry that closed without any action being taken.

The OFT would help determine whether loan terms unfairly favor Deloitte LLP, Ernst & Young LLP, PricewaterhouseCoopers LLP and KPMG LLP, 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,” Bell said in an interview. “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 London-based KPMG spokesman. The other auditors said they would cooperate with any probe.

Loan 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.

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

In a November 2010 submission to the House of Lords committee, the OFT said the market for audit services to large U.K. companies “may be limited” and a “targeted market study” of the loan covenants was being considered.

“It might be argued that some form of investigation by the OFT is overdue, with little evidence of action since it promised to keep the market under review,” said Gustaf Duhs, a lawyer at Stevens & Bolton LLP. “The OFT is protective of its reputation and is likely to feel obliged” by the government request.

Non-Audit Companies

The committee also said the OFT should look at limits on non-audit companies owning shares in auditing firms and whether liability deters smaller auditors from taking on large clients.

The regulator received a “clear recommendation” from the committee to undertake a more wide-ranging review, according to Euan Burrows, a lawyer with Ashurst LLP in London.

Should the OFT go ahead with the probe, it will likely end with a referral to Britain’s “second phase” antitrust regulator, the Competition Commission, which can ban the loan covenants, Burrows said.

The U.K. plans to merge the two regulators amid criticism the OFT is too slow and handles too few precedent-setting cases. Its biggest fines were slashed by an appeals court in March and April and its first criminal case collapsed at trial last year.

“The OFT is obviously in a very sensitive position given these reform proposals and it wants to be seen to be an effective enforcer,” said Bell.

The regulator’s probe will likely focus on the loan terms in the probe so broader audit market competition issues can be reviewed collectively by international regulators, said Duhs.

Individual banks determine the minimum value of loans that require an audit by the Big Four firms, said Brian Capon, a spokesman for the British Bankers’ Association trade group.

“This requirement will usually only apply in circumstances such as very large loans to companies, where a particularly high level of expertise or specialism is required,” he said.

Please upgrade your Browser

Your browser is out-of-date. Please download one of these excellent browsers:

Chrome, Firefox, Safari, Opera or Internet Explorer.