Private dinner between Deloitte, EY, KPMG and PwC chiefs in spotlight

Private dinner between Deloitte, EY, KPMG and PwC chiefs in spotlight


‘Concerted practices’

The reason both cite are new “concerted practices” provisions which came into effect in November 2017 and mean the ACCC has a lower evidence threshold to meet than the old cartel provisions.

These provisions, which have not yet been tested in court, prohibit companies from engaging in a co-ordinated way that “is likely to have the effect of substantially lessening competition”.

That means sharing commercially sensitive information, such as bidding intentions, strategies or even recruitment targets, could cause issues if one or more of the other participants takes action afterwards that the ACCC felt had a lessening impact on competition.

“The law was changed around concerted practices. They might not agree to do anything but they may go away and act in a certain way based on what is said,” according to Ian Wylie, a special counsel at William Roberts Lawyers.

Legal experts have already warned that cartel and anti-competitive behaviouris difficult to prove with some sceptical the ACCC will find any evidence of wrongdoing by the firms.

There is also a high benchmark in regards to the dinners. Even if any information was shared, and the firms all deny their respective CEOs talked about anything commercially sensitive, the ACCC would have to prove that the information had the effect of “substantially lessening of competition”.

Dinner for the big four

But the new laws raise a broader issue for business, and in the consulting industry in particular, a small sector where partners and directors from the big four and other firms often know each other.

The firms have all denied that Deloitte’s former CEO Cindy Hook, EY head Tony Johnson, KPMG CEO Gary Wingrove and PwC CEO Luke Sayers discussed any commercially sensitive matters during these dinners.

“The CEOs of PwC and our competitors meet around once per year. They do not discuss commercially sensitive matters at these meetings. On other limited occasions they attend meetings; for instance, meetings with regulators,” PwC said in its response to questions from the joint parliamentary committee running the inquiry.

Rival EY told the inquiry: “In addition to the meetings organised by ASIC, since 2015 the CEOs of the ‘big four’ meet once or twice a year at private dinners, generally held at the offices of one of the firms. These dinners are held to discuss industry trends, both Australian and global, and cultural issues such as inclusion and diversity.”

KPMG and Deloitte did not comment on the dinners in their responses.

‘Don’t do it’ 1

“The fact that there are private dinners between all four of the CEOs does raise questions,” said Mr Wylie.

ASIC

KPMG CEO Gary Wingrove, PwC CEO Luke Sayers, Deloitte’s former CEO Cindy Hook and EY head Tony Johnson. 

“As a general proposition, it is often, if not always, suspicious when senior members of large competitive organisations are having private meetings.

“It is, generally speaking, risky to do. But there are legitimate reasons for this to happen, such as within industry associations.”

Change to competition law around concerted practices “makes it even more risky to share any form of information about commercial intentions”, he said.

“My advice would depend on the purpose of the meeting. But in the absence of instruction about what the meeting was about, you’d say don’t do it.

“A broad-ranging dinner between the four CEOs of the four major competitors starts to ring alarm bells.”

Changes to competition law around concerted practices “makes it even more risky to share any form of information about commercial intentions.

“For those reasons you would generally say don’t meet in private with your competitors.

“Don’t talk about any pricing intentions, future business plans or future business strategy with people you are in competition with.

“If you’re talking about friends invited to a party, that’s a different thing.”

‘Don’t do it’ 2

The counsel to avoid the dinner was echoed by Rob Nicholls, a former ACCC staffer who is now a policy and regulatory specialist and senior lecturer at UNSW Business School.

“My advice on the dinners? Don’t, or manage what you’re going to be saying in advance. But if you’re risk averse, don’t, and if you’re taking a risk, why?” he said.

Part of the problem is that “even if it is something as simple as how many grads are you taking on this year” can be an issue, he said.

“That sounds innocent. But then you can work out the size of the graduate intake. That may change how you go about doing your hiring.”

The main issue with dinners “is there is a risk someone says something they shouldn’t.

“You have to be very careful. [Don’t discuss] anything that’s not public.

“I don’t think it would run the risk of lessening competition but [the firm or individual’s] reputation might be impacted.”

Nothing to see here

Minter Ellison partner Geoff Carter was sceptical the dinners would turn out to be an issue for the ACCC.

“I would urge caution in terms of drawing any conclusions from the fact the CEOs have met on occasion,” he said.

Experience had shown him “it is absolutely not the case that one should infer anything nefarious about the fact that the four CEOs of those firms have met for a dinner”.

“There are any number, frankly, of perfectly legitimate industry topics that they could have been properly meeting to discuss, many things in the public interest for them to discuss and I would be incredibly surprised that a forum or occasion like that would have been used for anything that would approach cartel conduct,” he said.

“In my experience, it would be an incredibly unusual outcome for people of that seniority to engage in conduct which they would clearly understand would be inappropriate. On the other hand, there are lots of reasons for them to be having legitimate discussions about things.”

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