Competition Law and Accounting Profession: Competition Issues

Competition law applies to the accounting profession because accounting, auditing, tax, advisory, and related professional services can involve economic activity and competition between firms. At the same time, accounting is heavily regulated because of public-interest concerns such as auditor independence, professional competence, confidentiality, and financial reporting quality. The central legal question is therefore where legitimate professional regulation ends and an unjustified restriction on competition begins.

In India, the Competition Act, 2002 and the Chartered Accountants Act, 1949 can interact in this area. The Delhi High Court's 2023 decision concerning ICAI is particularly important because it distinguishes ICAI's economic activities from decisions taken in its statutory regulatory capacity.

1. Meaning of Competition Issues in the Accounting Profession

Competition issues can arise at several levels:

1. Fee fixing — professional bodies or firms may coordinate fees rather than allowing prices to be determined independently.
2. Advertising restrictions — rules may restrict accountants from informing potential clients about their services.
3. Client solicitation — restrictions on how firms obtain clients can affect competition.
4. Entry barriers — qualification, licensing, accreditation, or registration requirements can restrict entry.
5. Professional training — exclusive control over continuing professional education can potentially exclude competing training providers.
6. Tender and audit appointments — coordinated bidding or allocation of clients can raise cartel concerns.
7. Referral arrangements — restrictions or agreements concerning commissions and referrals can affect competition.
8. Professional-firm mergers — consolidation among large accounting firms can affect choice and concentration.
9. Bundling of audit and non-audit services — large firms may use their position in auditing to expand into related services.
10. Access to professional networks and platforms — exclusive arrangements may disadvantage smaller accounting firms.

The European Commission expressly treats legal and accounting activities as part of the professional-services sector considered in competition policy.

2. Why Accounting Is a Special Competition-Law Sector

Accounting is different from an ordinary commercial market because the profession performs functions affecting investors, creditors, governments, companies, and the public.

Therefore, some restrictions can have legitimate purposes, such as:

• maintaining audit quality;
• protecting auditor independence;
• preventing conflicts of interest;
• maintaining professional competence;
• protecting confidential information;
• preventing misleading advertising;
• establishing minimum qualifications;
• enforcing ethical standards.

However, the existence of a public-interest objective does not automatically make every restriction lawful under competition law. The important questions include:

• Who imposed the restriction?
• What market is affected?
• Does the restriction actually improve professional quality?
• Is the restriction proportionate to that objective?
• Does it unnecessarily exclude competitors?
• Does the professional body itself participate in the market it regulates?

The tension is particularly clear in the European case concerning compulsory training for accountants.

3. Major Competition Issues

A. Fee Fixing

One of the clearest competition risks is collective determination of accounting fees.

If competing accounting firms independently determine their prices, competition can operate through:

• price;
• quality;
• expertise;
• speed;
• technology;
• sector specialization.

If competing firms agree on minimum or standard prices, clients may lose the ability to obtain services through price competition.

Legal concern

An agreement between competing accounting firms to fix prices can potentially constitute a horizontal cartel.

The risk is particularly high where a professional association facilitates or mandates coordination among competing practitioners.

4. Advertising Restrictions

Historically, professional bodies have imposed restrictions on advertising because of concerns about:

• professional dignity;
• misleading claims;
• client solicitation;
• commercialization of professional services.

Competition law, however, can examine whether such restrictions go further than necessary.

A rule preventing false or misleading advertising is substantially different from a rule that prevents legitimate information about:

• fees;
• qualifications;
• specialist expertise;
• services offered;
• geographical coverage.

The latter type of restriction may reduce consumers' ability to compare competing professionals.

5. Restrictions on Client Solicitation

Rules restricting direct solicitation can affect smaller firms particularly strongly.

Large established firms may already possess:

• strong reputations;
• established corporate relationships;
• extensive networks;
• large marketing resources.

New or smaller firms may depend more heavily on legitimate marketing and client acquisition.

Consequently, excessively broad solicitation restrictions can reinforce existing market positions.

At the same time, restrictions against deceptive, coercive, or misleading solicitation can serve legitimate professional purposes.

6. Entry Barriers

Professional licensing is normally justified by the need to guarantee competence.

Competition concerns can nevertheless arise if entry requirements become unnecessarily restrictive.

Examples include:

• excessive qualification requirements;
• unnecessary accreditation;
• restrictive recognition of foreign qualifications;
• limits on professional partnerships;
• restrictions on firm structures;
• unnecessary limitations on professional training providers.

The European Commission's work on professional services specifically identifies accountancy and auditing as sectors in which regulatory restrictions can affect competition.

7. Continuing Professional Education

Continuing professional education (CPE) presents an especially interesting competition issue.

A professional body may legitimately require accountants to undertake continuing education. But a different question arises if the same organization:

1. requires accountants to obtain training credits;
2. controls which training qualifies for those credits; and
3. itself supplies the training.

That creates a potential regulator-versus-market-participant conflict.

This issue was directly considered in the Portuguese OTOC case and the Indian ICAI litigation.

8. Six Important Case Laws

Case 1 — United States v. American Institute of Certified Public Accountants

Jurisdiction: United States
Year: 1972

The U.S. Department of Justice brought an antitrust case against the American Institute of Certified Public Accountants (AICPA). The case concerned restrictions involving competitive conduct within the accounting profession, including price fixing and bid rigging. The DOJ records classify the case under accounting, auditing and bookkeeping and identify the alleged violations as horizontal price fixing and bid rigging.

Competition-law significance

The case demonstrates that a professional association is not automatically insulated from antitrust principles merely because it represents a regulated profession.

Key lesson

Professional ethics cannot be used as a blanket justification for agreements that suppress competition between competing accountants.

Case 2 — United States v. State Board of Certified Public Accountants of Louisiana

Jurisdiction: United States
Year: 1983

The U.S. Department of Justice brought proceedings against the Louisiana State Board of Certified Public Accountants. The DOJ identifies the case as involving horizontal price fixing and agreements not to compete.

Competition-law significance

The case illustrates the risks associated with restrictions imposed within a professional regulatory structure where competing accountants may be prevented from competing freely.

Key lesson

Restrictions on competition in professional services can attract antitrust scrutiny even when they are connected with professional regulation.

Case 3 — Ordem dos Técnicos Oficiais de Contas v. Autoridade da Concorrência, Case C-1/12

Court: Court of Justice of the European Union
Year: 2013
Subject: Compulsory professional training for accountants

This is one of the most important European competition cases involving the accounting profession.

The Portuguese professional association OTOC required chartered accountants to obtain specified training credits. OTOC itself provided training and also controlled the approval of training supplied by others.

The CJEU held that the professional association's rules could fall within Article 101 TFEU even though OTOC had statutory responsibilities concerning the accounting profession. The Court found that the system restricted competition in the market for compulsory training.

Competition-law significance

The case demonstrates that:

A professional association's regulatory status does not automatically place its economically significant rules outside competition law.

Key lesson

Where a professional association both regulates a market and participates in that market, competition concerns become particularly important.

Case 4 — Mr. Arun Anandagiri v. Institute of Chartered Accountants of India

Forum: Competition Commission of India
Case No.: 93/2013
Order: 28 February 2014

A complaint was filed against ICAI concerning its Continuing Professional Education programme. The allegation was that structured CPE seminars were effectively restricted to ICAI and its organs, preventing other organizations from competing in providing such training. The CCI directed an investigation under Section 26(1).

Competition issue

The central allegation concerned potential abuse of a dominant position under Section 4 of the Competition Act.

The argument was essentially that ICAI controlled access to a market for CPE activities while also participating in that activity.

Importance

This case brought the OTOC-type question into the Indian competition-law context.

Case 5 — Institute of Chartered Accountants of India v. Competition Commission of India

Court: Delhi High Court
Judgment: 2 June 2023

This case arose from the CCI's 2014 order concerning ICAI's CPE programme.

The Delhi High Court recognized that ICAI can undertake economic activities and that its educational services can fall within the broad concept of an "enterprise" under the Competition Act. However, the Court distinguished those activities from ICAI's statutory regulatory functions.

The Court ultimately set aside the CCI's investigation order because the challenged CPE arrangement was connected to ICAI's statutory regulatory function.

Importance

This case establishes an important distinction:

Economic activity ≠ every regulatory decision is automatically subject to competition-law investigation.

The Court also discussed the OTOC decision and noted factual differences between the Portuguese and Indian situations, including the structure of the relevant training market.

Key lesson

When analysing competition issues in professional regulation, it is necessary to identify the precise activity being challenged, rather than treating the entire professional body as either completely inside or completely outside competition law.

Case 6 — FTC v. American Institute of Certified Public Accountants

Forum: U.S. Federal Trade Commission
Subject: Professional advertising, solicitation and fee-related restrictions

The FTC challenged various AICPA professional rules. The Commission's materials describe restrictions concerning advertising, certain contingent fees, referral-fee and commission arrangements, and solicitation practices.

Competition significance

The case demonstrates that professional codes of conduct can contain provisions that affect competitive behaviour.

Rules relating to:

• advertising;
• solicitation;
• referral fees;
• commissions;
• contingent fees

may influence how accountants compete for clients.

Key lesson

A professional rule should be examined according to its competitive effect and professional justification, rather than assuming that every rule in a professional code is immune from competition law.

9. Additional Indian Context

The ICAI litigation is particularly significant because the Competition Act has a broad concept of an enterprise.

The Delhi High Court noted that ICAI is a legal person and that activities involving educational services can constitute economic activity.

However, the Court drew a distinction between:

Economic activities

Examples may include:

• educational programmes;
• professional training;
• publications;
• other services supplied to users.

Statutory regulatory functions

Examples include:

• professional regulation;
• maintaining professional standards;
• regulatory requirements imposed under the Chartered Accountants Act.

The distinction is important because competition law generally focuses on economic conduct rather than simply reviewing every decision made by a statutory regulator.

10. Accounting-Firm Market Concentration

Another major competition issue is concentration among large accounting firms.

The market can become concentrated because large firms benefit from:

• international networks;
• specialist personnel;
• technological infrastructure;
• global client relationships;
• sector expertise;
• ability to undertake large multinational audits.

Concentration can create questions concerning:

• client choice;
• switching costs;
• audit-market access;
• independence;
• smaller-firm entry;
• mergers between major firms;
• access to large corporate tenders.

A high market share alone does not automatically establish unlawful conduct. Competition analysis normally requires examination of market definition, entry conditions, competitive constraints and the actual conduct involved.

11. Big-Firm and Small-Firm Competition

Competition policy must also consider the relationship between large and small accounting firms.

Large firms may have advantages in:

• global coverage;
• technology;
• specialist teams;
• complex audits;
• multinational clients.

Smaller firms may compete through:

• lower costs;
• specialized expertise;
• personal service;
• local knowledge;
• niche industries.

Regulation should therefore avoid unnecessarily preventing smaller firms from entering markets while still maintaining appropriate professional-quality requirements.

12. Audit and Non-Audit Services

Another competition issue concerns the combination of:

• statutory audit;
• tax services;
• consulting;
• technology services;
• risk management;
• transaction advisory.

A firm that already has an audit relationship may have advantages when selling related services.

Competition analysis can therefore involve questions such as:

• whether clients are effectively locked into one provider;
• whether services are bundled;
• whether competitors receive equal opportunities;
• whether audit independence rules affect market structure.

These issues can involve both competition law and professional-independence regulation.

13. Professional Associations and Competition Law

Professional associations can perform two different roles.

Role 1 — Regulator

They may:

• establish professional standards;
• issue ethical rules;
• regulate qualifications;
• discipline members.

Role 2 — Market participant

They may also provide:

• education;
• training;
• publications;
• certification-related services;
• conferences;
• professional information.

Competition problems become particularly sensitive when an association regulates a service market while also supplying services in that same market.

The OTOC case illustrates this issue particularly clearly.

14. Competition-Law Tests Relevant to Accountants

A. Anti-competitive agreements

Potential examples:

• accountants agreeing on minimum fees;
• allocating clients between firms;
• agreeing not to compete in particular regions;
• bid rigging;
• exchanging commercially sensitive pricing information.

B. Abuse of dominance

Potential examples:

• exclusionary accreditation;
• discriminatory access to professional infrastructure;
• tying;
• refusal to provide essential professional facilities;
• exclusion of rival service providers.

C. Merger control

Potential concerns include:

• consolidation of major accounting networks;
• reduction in audit-firm choice;
• elimination of important competitors;
• increased concentration in specialist services.

D. Vertical restrictions

Examples could include:

• exclusive arrangements;
• restrictive referral agreements;
• platform restrictions;
• discriminatory access to professional networks.

15. Difference Between Legitimate Regulation and Anti-Competitive Restriction

The key issue is proportionality and competitive impact.

16. Overall Legal Position

The case law shows several broad principles:

1. Accounting is an economic profession, so competition law can be relevant to accounting services.
2. Professional associations are not automatically immune from competition rules.
3. Price fixing and bid rigging among competing accountants present serious competition concerns.
4. Advertising and solicitation restrictions can affect competitive conditions.
5. Professional education rules can restrict competition when they exclude rival training providers.
6. Regulatory status matters, particularly when a statutory professional body exercises powers specifically assigned to it by legislation.
7. The precise activity must be identified before determining whether competition law applies.
8. Public-interest objectives can justify regulation, but the competitive effects and necessity of the restriction still matter.
9. Regulator and market-participant functions should be carefully distinguished.
10. Market concentration among large accounting firms can raise competition questions even where the firms are individually legitimate competitors.

Conclusion

Competition law in the accounting profession is therefore based on a balance between professional regulation and competitive freedom. Rules designed to protect audit quality, independence, competence and public confidence can be legitimate, but arrangements involving price coordination, bid allocation, exclusionary accreditation, restrictive advertising, or foreclosure of competing professional-service providers can raise competition concerns.