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ASSIREVI/SOCIETA' DI REVISIONE


PRESS RELEASE



PRESS RELEASE

The Big Six have been found liable for concluding agreements on the auditing markets


The Competition Authority, at its meeting on 20 January, resolved that Associazione Italiana Revisori Contabili (Assirevi), and its members, the auditing firms Arthur Andersen, Coopers & Lybrand, Deloitte & Touche, KPMG, Price Waterhouse, Reconta Ernst & Young (the so-called Big Six), had committed offences under section 2(2) of the Competition Act by concluding agreements to substantially restrict competition on the auditing services market in Italy, designed in particular to standardize fees and coordinate client acquisition. In view of the serious nature of these offences, the Authority imposed fines on the six firms totalling 4.5 billion lire: 1.223 million on Arthur Andersen, 840 million on Coopers & Lybrand, 788 million on Reconta, 687 million on KPMG, 539 million on Price Waterhouse and 470 million on Deloitte & Touche.
The agreements related to the statutory corporate audit services market and the voluntary audit services market, on which the Big Six hold a market share, respectively, of 86 percent and 74 percent.
The agreements covered virtually every aspect of competition between the auditing firms.
Firstly, the agreements set the fees for auditing. Until 1995 Assirevi had circulated an annual benchmark audit fee and working hours table according to the size and the sector of activity of the client firms. The agreement also laid down rules to be followed when acquiring new clients in order to protect the market positions of each firm. In particular these rules prohibited any form of competition in relation to each audit firm's "client portfolio". By applying these rules, the auditing firms were able to agree, for example, on how to respond to requests for discounts from client companies, and to establish in advance the firm that would be awarded auditing contracts, in many cases making competitive tendering a mere formality.
Other agreements were also designed to ensure anti-competitive behaviour by the auditing firms for public tenders and when establishing agreements with the authorities.
The agreements concluded by the Big Six, and particularly their coordination to acquiring clients, had the effect of stabilizing the market positions of each firm for a long period of time.
The anti-competitive conduct of Assirevi and the Big Six were deemed to be particularly serious because they were forms of horizontal coordination of prices and other contractual conditions which could have otherwise been individually negotiated by the auditing firms with their client companies. Furthermore, the agreements were implemented by the main auditing and certification firms operating in Italy. These offences were committed despite the Authority's earlier measure resolved on 26 August 1991, in which it annulled a fee-setting regulation issued by Assirevi setting fee scales and working hours.
Assirevi and the Big Six, according to the investigation, committed these offences between 1991 and at least 1998.
Unlike Assirevi, however, during the investigation the Big Six not only admitted that they were liable for the alleged conduct but also provided additional information making it possible to identify and appraise their anti-competitive conduct, and the Authority took account of this when imposing the fines.
Lastly, the Authority noted out that the investigation found no evidence to show that Consob had implicitly, let alone explicitly, consented in any way to the anti-competitive conduct of which Assirevi and the Big Six have been found liable.

Rome, 21 February 2000