Can the stranglehold of Big Four auditors be broken?
There was a slightly odd announcement by the Office of Fair Trading this afternoon.
The competition watchdog said "there are competition problems in the audit market", and added that it could ask the Competition Commission to conduct a detailed investigation, because the "statutory test" for a reference to the Commission had been passed.
But although the OFT has deep concerns about the stranglehold of the Big Four accounting firms over the business of auditing big companies, it is not quite sure what the remedies might be.
Here's the basic problem. The dominance of the Big Four - PriceWaterhouseCoopers, Deloitte, Ernst & Young and KPMG - is a global phenomenon, rather than an exclusively British one. And the OFT's remit, and that of the Competition Commission, is wholly domestic.
What's more there is no global body for dealing with competition problems.
To be clear, as a British phenomenon it is pretty pronounced phenomenon: in 2009, the Big Four received 100% of all audit fees paid by FTSE100 companies (the UK's largest listed businesses) and 98% of the next tier, the FTSE250 businesses. One firm PwC on its own received a staggering 47% of FTSE audit fees.
For the OFT, the Big Four's stranglehold, combined with relatively low rates of switching between them by corporate clients, means that fees are probably higher than they ought to be, for services that are perceived to be pretty bog standard.
And what's particularly odd for firms that ought to feel secure in their earnings, the auditors don't appear to be as aggressive as they might be in forcing companies to disclose the risks they run. Or at least that would appear to be a legitimate conclusion of how the Big Four failed to disclose the reckless lending and investing of banks in the boom years before the great banking crash of 2008.
So what would happen if - for example - the Competition ordered PWC to break itself up, which is something that it might well end up doing, according to my sources.
Well, that would not necessarily lead to a step change in competition.
The reason is that the break-up would apply only to the UK arm of PwC. And the bit of PwC in the UK that remained attached to PWC's overseas network would still have a massive advantage over competitors, because PWC's British-based multinational clients - the likes of Barclays, Tesco and BT - would presumably stick with the international network able to audit all their subsidiaries and branches, rather than employing a British firm without global capability.
The bit of PWC forcibly hived off might well wither and die quite quickly, or simply specialise in auditing smaller companies (where there is less of a competition problem, in any case).
All of which leaves the OFT feeling a bit non-plussed.
In the absence of possible remedies, the OFT doesn't yet want to put the Competition Commission and the accounting firms to all the cost and bother of a lengthy and expensive probe.
It will therefore conduct a review of whether "there is a reasonable chance that appropriate remedies will be available to the Competition Commission."
Or to put it another way, if you have the faintest idea how to turn the Big Four into the Not-Quite-So-Big Eight, with consequential benefits to the cost and quality of audits, I know a watchdog desperate to hear from you.