New winds of competition

Press, 11 October 1986, Page 8

New winds of competition

Wellington reporter Doctors, lawyers, and practitioners of other professions may soon be exposed to new winds of competition after the Commerce Commission reviews its rules on fees, advertising, and professional entry. The commission’s chairman, Mr John Collinge, foreshadowed the start of the review yesterday with a warning that professions had to confront the question of whether they were expensive monopolies. Mr Collinge said the commission would review the regulations of each profession in turn to see where they contravene the restrictive trade practice provisions of the new Commerce Act. In an address to the Institution of Professional Engineers, he said the professions had to ask themselves whether they were “God-sent guardians of the public interest in their sphere of endeavour” or preventing competition among them-

selves unnecessarily at the expense of the consumer. Professions had often in the past sought to create monopolies that could not be justified by the public interest in maintaining professional standards, Mr Collinge said. He pointed in particular to the setting of mandatory fee scales which cut incentives to minimise costs and prevented individual professionals who did from passing the benefits to clients. He questioned whether the need to maintain standards justified the retention of any minimum fee scales. Of entry restrictions to professions, he said the associations charged with setting them should be careful to use criteria which were readily understood by outsiders to avoid allegations that their main purpose was to restrict competition. Rules against mixing different professions within one business operation were also likely to

become increasingly suspect, he said. . “Mixed” firms could be more convenient for clients, less expensive to run, and not prevent employees being subject to their own professional regulations, Mr Collinge said. Asked which professions were most in need of deregulation in terms of the act, Mr Collinge declined to single out particular ones but said the need for review was widespread. He commended the Law Society and the Society of Accountants for abandoning minimum fees and restrictions on advertising before the act was passed. Mr Collinge said the commission would take a broad definition of profession, to encompass groups such as real estate agents and chiropractors, which have codes for selfregulation. He said the commission would be careful not to ignore in its review the public benefits of profes-

sional standards. However, where a rule appeared to constitute an unfair restriction on trade, it was up to the professional association concerned to argue its merit for the public. The executive director of the Society of Accountants, Mr Ross Macdonald, yesterday ’ welcomed the review. Accountants abandoned their recommended fee scale in 1984, permitted public advertising for trade from January 1, 1986, and lifted restric-

tions on competitive tendering for auditing work, also early this year. Mr Macdonald said the society had responded to a climate favouring more liberal self-regulation over the last four years, and was now considering lifting an existing restriction on advertising the price of accounting services. Mr Collinge said the commission would prefer to break down restrictive practices by encouraging professions to make changes themselves.