An unprecedented antitrust complaint against the nation's eight largest accounting firms charging they constitute an "awesome professional monopoly" was filed with the Federal Trade Commission in San Fransciso today.
The complaint, brought by seven organizations -- including the Mexican-American Political Association, the western branch of the NAACP and the California Filipino CPA association - alleges that the eight firms have inflated the price of accounting services artificially and systematically excluded minorities from entering the field.
The action apparently represents the first time an antitrust complaint has been filed against any of the nation's top accounting firms. The eight named in the complaint are: Arthur Anderson & Co.; Ernst & Ernst; Cooper & Lybrand; Deloitte, Haskins & Sells; Peat Marwick & Co.; Price Waterhouse & Co.; Touche Ross & Co.; and Arthur Young & Co.
The complaint alleges the eight firms employ one-fourth of all certified public accountants in the country and represent 478 of the Fortune 500 largest industrial corporations in the United States.
The salary of the firms' average partner is over $100,000, 50 percent higher than that of a doctor and three times that of the average attorney, according to the complaint. The FTC is asked in the complaint to bar the eight firms from bidding on any future contracts by a major American corporation, and also to ban the federal government from contracting with any corporation that does business with the eight accounting firms.
"The Big Eight is the most unscrutinized and powerful professional force in this country," said Robert Gnaizda, a San Francisco attorney representing the petitioners before the FTC. "Their monopolistic dominance . . . far exceeds the dominance of most cartels and that of all Wall Street law firms."
"This group, having no competition, sets prices at extremely high levels," Gnaizda says.
The complaint also charges the eight firms have "discouraged the entrance of minorities" and others into the profession through overly strict testing standards and a refusal to accept the credentials of CPAS accredited in Asian, Latin American or African countries.
One of the firms for example, Price Waterhouse, had 418 partners with an average salary of $144,000 in 1977, but none of the partners was black or Mexican-American, according to the complaint.
The charges in the complaint drew a sharp response from Jim Jensen, managing partner at the San Francisco office of Price Waterhouse. "I'm flabbergasted that someone would make those kinds of charges againts the CPA profession," Jensen says.
"They just don't make any sense . . . I don't think the public interest is served by lessening the standards . . . for CPAS."
The petitioners are asking the FTC to force the eight firms to adopt affirmative action hiring plans and bar their members from participation in associations that set the standards for the profession.
Representing the petitioners in the complaint is Public Advocate Inc., a prominent San Francisco public interest firm. The antitrust complaint will now be forwarded to the FTC in Washington, where the commission will determine whether to investigate or hold hearings on the matter.