Protection racket
Oligopoly power, as we've stated often, extends far beyond the ability to set prices. It's become increasingly important, because it can be done quietly, off the outrage radar, is the limiting of cost. And one of the best ways to limit costs is by limiting risk.
For the Big Four accounting firms, PricewaterhouseCoopers, Deloitte & Touche, Ernst & Young and KPMG, that means limiting liability from suits by defrauded shareholders of the companies they audit. So it's no surprise to read a Wall Street Journal article ("Outside Audit," 11/1/06) detailing their plans.
Business is booming at the Big Four, the article points out, thanks to the elimination of competitor Arthur Andersen after the Enron debacle and also thanks to the tough Sarbanes-Oxley requirements passed in its wake. "
Yet according to the WSJ article, "the Big Four want to limit court damages that investors and others can seek from them for flawed audits of public companies. Without such a shield, the firms say, it's only a matter of time before one of them is felled by a massive court award."
To that end, the Big Four are sending out their lobbyists in Washington and Brussels to have governments give them special protection from liability. This is a favored tactic of oligopolies trying to rejigger the system. What they don't think they can win in court, they want to legislate away.
But critics say that, in fact, none of the Big Four has been gravely injured so far by lawsuits, in spite of plenty of corporate fraud under their watch. The article points out that such class-action lawsuits are actually down over the past few years. One commentator notes in the article that "Auditors need to be held to a high standard. Those are the outsiders we rely on. It's tough to have that responsibility, but that's what they're getting paid for."
The real problem for the Big Four is not private civil lawsuits but government criminal prosecution. The threat of that wiped out Arthur Andersen and threatened to sink KPMG, until the government decided that KPMG was too big to fail.
While the climate may not be right just now to pass new laws giving protection to wealthy companies, the Big Four are hoping to do with regulation what they may not be able to do with legislation, according to the article.
While advocates for working-class people who go bankrupt get short shrift from our government and debt forgiveness becomes ever harder, the biggest and richest companies are looking to get absolved from their responsibilities, and, in the long run, they might win.
5:50:25 PM 
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