Introduction
The word “profession” is relevantly defined
in the Oxford Dictionary as “A vocation, a calling, esp. one requiring advanced
knowledge
or training in some branch of learning or science, spec. law,
theology or medicine”, or more widely “any occupation as a means of
earning a
living”.[2]
For present purposes, those definitions are
too generic. What is it about the occupation of a lawyer or a doctor (or a
theologian
– although I do not propose to further refer to theologians) that
distinguishes it from that of a plumber or an electrician? Or,
for that
matter, a butcher, a baker or a candlestick maker?
To many of us, the answer is
intuitive, like the answer to the question of when does day become night: it
is hard to explain but
I know when it is day and I know when it is night. I
know the difference. Behind the intuition lies a complex understanding of
the
existence of a set of conditions. Some describe the difference in terms of the
way the particular occupation is controlled,
perceiving a clear difference
between the degree of regulation imposed either by statute or by the
professional body (controlling
such things as competition between
professionals, fee regulation, advertising or association restrictions and the
like), and the
degree of regulation imposed on other businesses[3].
For reasons which are apparent, that is not for New Zealand and Australia a currently applicable distinction. In an interesting
article entitled “Theory
and the Professions”[4],
Professor Friedson, a sociologist, endeavours to identify the essence, or the
essentials, of a profession. He specifies two “key
ideas” commonly used:
(1) the members of a profession are dedicated to public service, rather than
only to their own economic interest like other occupations;
and
(2) the members of a profession have a special kind of education, knowledge
and skill.
But he looks behind those ideas
to seek a systematic elaboration of the conditions in which those key ideas can
exist. The common
feature of the professions, he opined, is firstly that they
are occupations whose members control recruitment, training and the work
they
do. And secondly it is work different from the crafts because it requires
formal organisation, and theoretical or abstract
knowledge for its adequate
performance, and generally the exercise of discretionary judgment.
As in a number of sources to
which I had regard in preparing this paper, the thesis may reflect more the
American experience than
the current New Zealand and Australian reality,
because Professor Friedson postulates the need for “some consequential form of
labour
market control by the occupation”[5],
before then considering whether the cessions of that control to the profession
is in the public interest having regard to the quality
of the work done and the
degree of altruism demonstrated by the members of the professions. That
analysis may be reflected in, and
refined by, Professor Hatfield, as her paper
reveals that the American Bar Association has had, and continues to have, a
pervasive
influence over regulation of the market for the provision of legal
services in the United States[6].
I shall later refer to certain
other features of Professor Hartfield’s paper.
I should briefly refer to some
economists’ analysis. Apparently economics has no theory of the professions as
distinct or relevantly
different economic entities, although there is much
literature discussing individual professions such as law or medicine.[7]
It has been said that economists tend to model each profession differently.[8]
Professions operate in markets and market forces determine outcomes although
professional markets are said to have a high level
of regulation or restriction
which affects competition.[9]
The economic focus in literature
is on behaviours within professional markets.[10]
Generally, economists are said to make the implicit assumption that
professions are ordinary neoclassical firms assessed by applicable
standards.[11]
This may be referred to as “neo-classical production theory”, where “factors
of production” are basic units of analysis and professions
are
“knowledge-reliant production organisations” operating in networks. Professionals
are said to operate autonomously (and competitively)
but are dependant on their
professional network for maintenance and development, including to develop
their core competencies, which
earns them “rents”[12].
Reputation of professionals can operate as a quality indicator for consumers
and as a mechanism for peer-review within the network.[13]
According to Savage, the major
shortcoming of conventional economic approaches to understanding professions is
they analyse “demand-side
questions” or the impact on the consumer, with the
implication that the existence of professions is prima facie evidence of
market failure.[14]
There is no need for too
theoretical an analysis of what constitutes a profession for the purposes of
this paper. I shall take the
definition, also adopted by the Australian
Competition and Consumer Commission (ACCC) from the Australian Council of
Professions.
It states that a profession is:
… a disciplined group of individuals who adhere to high
ethical standards and uphold themselves out as, and are accepted by, the
public
as possessing special knowledge and skills in a widely recognised, organised
body of learning derived from education
and training at a high level, and who
are prepared to exercise this knowledge and these skills in the interests of
others.[15]
Some would stress that element of
the definition which conveys responsibility for the welfare, health and safety
of the community
as taking precedence over other considerations.[16]
The medical profession has
emphasised that ethical commitment in support of its argument that it should
not be subject to competition
regulation.[17]
The courts in Australia and New Zealand have not been persuaded that the
ethical commitment represents a point of distinction so
significant as to
justify exempting the professions from the laws promoting competition[18],
in line with Lord Denning’s early statement that:
[if professionals] make a rule which is in restraint
of trade, they are as much subject to the law of the land as anyone else…
The
professions have no exemption….[19]
Professor Fels alluded to the
penumbra between night and day, or between professionals and other occupations
when he said that “…perhaps
estate agents and other categories which shade into
skilled occupations….” are to be embraced in our accepted definition of a
profession.[20]
A consequence of being a
profession is the economic rationale for regulation of professions as including
the limitations on information
on professional services available to consumers,
the possibility that transactions may be open to misrepresentation and abuse of
trust (‘non-voluntary’), and the existence of important distributional
concerns.[21]
For present purposes, it is
sufficient to use the term “professions” to encompass a range of occupations
including accounting, architecture,
law, medicine, engineering and perhaps
other occupations such as paramedical groups, alternative medicine groups and
(as Professor
Fels said) real estate agents. That should not be regarded as
comprehensive.
The point of the discussion thus
far is to identify the characteristics of those occupations which qualify as
professions. Broadly
speaking, that is because they have the two or three key
features of service, discretionary judgment applied to special learning,
and
(to some) independence of structure (and interdependence within that structure)
which might make the application of competition
law regulation to them other
than routine.
Should the professions be subject to competition law regulation?
Recent European and American literature
suggests that their debate is still as to the extent to which competition law
regulation should
extend to the professions; rather than about how its
application has affected the professions and their regulation, and might affect
the professions in the future.
In New Zealand and Australia, the simple fact is that the Commerce Act 1986 (NZ) and the Trade Practices Act
1975 (Cth) (TP Act) apply to the professions equally as to any other
occupational group. That issue has long been resolved in each of
our
jurisdictions. Indeed, the facility with which New Zealand was able to bring
about that circumstance, compared to Australia,
reminds me of the remarks of Professor
Brunt, who once humorously described the Australia-New Zealand relationship in
this context
as follows:
[p]icture
the lumbering elephantine Australia accompanied by its mobile little companion
animal New Zealand, skipping along,
sometimes ahead, sometimes dropping behind,
sometimes circling in dazzling fashion.[22]
Part IV of the TPA principally
regulates competition issues. It is largely, but not entirely, the mirror of
Pt II of the Commerce
Act. Part V of the TPA deals with consumer protection,
along with the Fair Trading Acts of the States, again largely mirroring the
Fair
Trading Act 1986 (NZ). There are historical and constitutional reasons why
Australia has a confetti of Fair Trading Acts. As in Australia, New
Zealand has also implemented sector-specific legislation in relation to certain regulated
industries.[23]
This paper will focus on Part II
of the Commerce Act and Part IV of the TPA. Although both Acts apply equally
to individuals, corporations
and businesses[24]
in the conduct of professional practices, it was not always so. The
Commonwealth of Australia, having power over only identified
arenas, could only
legislate to cover trading corporations and services operating in interstate
trade or commerce or when utilising
particular facilities such as telephones.
Hence, the professions in 1975 and for many years thereafter, being conducted
through
sole practices or partnerships rather than incorporated entities were
beyond its reach. Some State and Territory legislation even
exempted certain
conduct from the reach of the TPA by specifically approving or authorising it.
The Trade Practices Commission
(the TPC) (now the ACCC) in December 1990 released a discussion paper on
“Regulation of professional
markets in Australia: issues for review”. At the
time, as it found, the professions were subject to a diversity of government
and
self-regulation arrangements which varied considerably between individual
professions, and between individual States and Territories.
That discussion paper commented:
The traditional justification for regulation of the professions
has been the protection of consumers through measures to maintain
the quality
of services and the competence and integrity of their providers. It is being
recognised increasingly, however,
that such regulation is not without cost to
consumers and the community. To the extent that it restricts competition, the
service choices available to consumers may be limited, the incentive to
innovate and contain costs may be reduced and prices
may be inflated as a
result.
From the community’s perspective, as well as that of
the professions themselves, it is therefore important to be able to identify
both the benefits and the costs of existing regulatory measures and to assess,
as far as possible, for individual professions
whether those regulations provide
net benefits for consumers after taking account of any costs resulting from
restrictions
on competition.[25]
Subsequently, the TPC issued
separate final reports on the accounting profession in July 1992[26],
on architects in September 1992[27];
and on the legal profession in March 1994[28].
At the time, the final report on the legal profession was seen as quite
challenging. It recommended the application of the TPA
to the legal
profession, mutual recognition of legal professionals throughout Australia,
opening to non-lawyers the opportunity to
supply legal services in a range of
areas (to be further identified), the structural separation of barristers and
solicitors within
the legal profession to be abolished; caution in the use of
specialist accreditation schemes; relaxing of rules regarding ownership
of
legal practices; and other matters. The medical profession escaped the
particular attention of the TPC at that time.
During that process, the
committee chaired by Professor Hillmer was inquiring into national competition
policy at the behest of all
Australian governments. The Hillmer report[29]
said that the professions comprised an “important sector of the economy”[30],
and that it was difficult to justify the non-application of the TPA to the
professions[31].
The Hillmer report, together with
the several reports of the TPC into the professions, led to the TPA from
November 1995 applying
in full to the professions.[32]
That objective was achieved in
1995 and 1996 by the enactment of Competition Policy Reform Acts, by
each of the State and Territory parliaments. Those Acts contained Competition
Codes which mirror the provisions of Part IV of the TPA, but extending
their application to individuals rather than corporations only.
By that lumbering
elephantine process, the reach of Part IV of the TPA was extended to the
professions.
New Zealand had no such
constitutional contortions to go through. The Commerce Act was able to, and
did apply to the professions
and to professional associations, including the
health sector.[33]
The legislation
Both the TPA and the Commerce Act
have been amended from time to time. Over time, the content of Part II of the
Commerce Act and
Pt IV of the TPA has become closer, although it is not
identical. It has been said that the Commerce Act was amended in 2001 to
update the key tests and thresholds in line with international trends,
particularly that of Australia.[34]
Figure 1 which follows
illustrates the closeness of those Parts of the Acts, and the differences:
Figure 1 Comparison
of anti-competitive practices
More fundamentally, and as one
would expect, similar key concepts appear in both Acts such as the concept of a “market”.[35] It should also be noted that both the TPA and the Commerce Act also have
exceptions to the anti-competitive provisions.[36]
It appears that the only provision of the TPA not substantially mirrored in the
Commerce Act is s 49 which deals with dual listed
company arrangements that
affect competition.
Essentially, Australia and New Zealand have competition laws that are considered “fairly well harmonised” with
the “differences not
all significant”.[37]
The major difference is considered to be that the TPA has a high number of per
se offences.[38]
Even though New Zealand and Australian case law is freely cited in judgments of
each jurisdiction,[39]
it has been noted that there is still slight potential for there to be
interpretive differences by the respective courts and regulators
in both
countries.[40]
An example of this is in the application of the substantial lessening of
competition test relevant to provisions dealing with exclusionary
agreements
and mergers and acquisitions.[41]
One final observation, with
particular importance to the professions, is that in Australia the National
Competition Council deals
with issues relating to restrictions on professions
imposed by legislation which may affect competition and which are outside the
scope of the TPA; whereas privately imposed restrictions (via self-regulation
arrangements) fall within the scope of the TPA.[42]
It is not clear whether there is a similar arrangement in New Zealand.[43]
How competition law has been applied to the professions
The professions since at least
1995 have not been under the radar of either the ACCC or the Commerce
Commission, although Pengilley
has said that in both Australia and New Zealand, enforcement authorities have traditionally enforced competition laws against
“business”
before “getting around to applying it to the professions”.[44]
The professions, and their institutional bodies, have no reason to relax their
awareness of the applicability of the Commerce Act
and the TPA to their
activities.
The ACCC has a clear commitment
to securing compliance with and enforcement of Part IV of the TPA relating to
the professions. It
has identified several broad issues of concern for the
professions. These include monopoly in certain areas of the professions; entry
restrictions; anti-competitive behaviour and price regulation. That is not an
exhaustive list.[45]
In 2001, the ACCC established a dedicated Professions Unit with resources
specifically directed towards promoting compliance and
awareness,[46]
although its functions are now spread across Commission staff and among Commissioners.[47]
Nonetheless, clear promotion of regulation affecting professions appears on its
website and with numerous publications also available
to the public. At
present, it appears to have a particular focus on the health sector.[48]
Many reviews and reports have also been conducted on the health sector and
competition.[49]
Focus of the regulator
upon the professions is not nearly as obvious in New Zealand. The Commerce
Commission’s website does not refer
to the interests of professions as
prominently as that of the ACCC. However, references may be found in documents
such as a 2005
briefing which identified the professional health sector as an
area of concern.[50]
The Commerce Commission’s news releases on prominent cases also indicate an
interest in the professions.[51]
As with Australia, the apparent focus is upon the health profession.
Interestingly, there has been
global interest in the application of competition law to the professions, with
studies conducted in
the United States on the health care market;[52]
and in the UK and Europe in relation to the legal profession.[53]
Several studies have also been conducted in Europe on professions generally[54]
and similarly in Canada on self regulated professions.[55]
Australia’s Productivity Commission has also prepared a discussion paper on
professions.[56]
It is unclear why the regulator’s
focus is predominantly on the professional health/medical sector. One might
speculate that there
is a perception that the health sector, including the
health professional groups may have less awareness of competition regulation
than
other professions. There may be a perception that the other professions have
been more responsive to the need to restructure
to avoid anti-competition
conduct. It has also been suggested that heavy regulation of a profession,
such as the medical profession,
can contribute to a higher number of complaints
which then attracts the attention of regulators.[57]
How then has this focus – on price
fixing or boycott conduct between professionals, institutional restrictions
such as on advertising
or forms of professional conduct disapproved by
disciplinary bodies, entry restrictions, or on misleading conduct – been
reflected
in experience over the last 10 or 15 years?
In the case of the medical
profession, as discussed by Janes[58],
the application of competition law has been utilised in quite a vigorous way.
Under the Commerce Act, the
medical services market (using a generic description – there are obviously more
refined markets, both
by the nature of the services provided and by geography)
is covered in the same way as markets for most other services.[59]
The s 2 definition of services covers the services provided by medical
practitioners, whether individually, or under a corporate
or association
structure, unless the work is undertaken under a contract of service
(employment contract).[60]
Practitioners acting as part of any body corporate or association are also
subject to liability, as well as the entity itself.[61]
The situation is similar under the TPA.[62]
It is clear that both countries
identified the medical profession as having poor awareness of competition
regulation. In 1997-1998
financial year, the Commerce Commission’s Annual
Report identified the health sector as a special area of focus due to its poor
awareness
of the Commerce Act.[63]
This was again raised in 2005.[64]
Similarly, in Australia the Wilkinson Review in 2002 comprised a major analysis
of the medical profession. It examined the impact
of the competition provisions
of the TPA on the recruitment and retention of medical practitioners in rural
and regional Australia,
and found that there was a degree of uncertainty and
misconception amongst the medical profession regarding the application of the
TPA to doctors, particularly in the areas of medical rosters, collective
negotiations and fee setting.[65]
Many areas of market failure in
the medical profession have also been described by commentators and are said to
result from the unique
characteristics of the professional medical market.[66]
Competition law principles are still applied regardless of the responses of
the medical professional based on the “unique characteristics
inherent in the
delivery of medical services”.[67]
The recent case of Shahid v Australasian College of Dermatologists[68]
(“Shahid”) demonstrates that medical professionals and their
professional associations may be engaged in trade and commerce no less than any
other profession, corporation or individual under the TPA.
Dr Shahid was a general
practitioner who developed an interest in being recognised as a specialist
dermatologist. That required status
as a Fellow of The Australian College of
Dermatologists (the College). The College required, for fellowship, a period
of supervised
training in an accredited post for a period of 4-5 years. The
accredited positions were only obtainable on the recommendation of
the College,
that is in effect were granted on selection by the College. In Western Australia, where Dr Shahid lived, there was
only one accredited post available in
each year. She was unsuccessful in each of the several years she applied to be
accepted to
one of those posts.
Dr Shahid did not complain that
the selection process, and the general role of the College, was anti-competitive.
She complained
that the College had engaged in misleading and deceptive conduct
about the attributes that she should have and promote in her selection
applications, and about its selection processes and appeal rights.
Consequently, for present purposes, the outcome of the case is
not especially
significant. What is significant is that the College, which principally
promoted dermatological research and training,
and conducted examinations
leading to the award of diplomas, was a trading entity. It was engaged in
trade and commerce, including
by its conduct of meetings, conferences and
courses (per Branson, Stone and Jessup JJ[69])
and by the publication of its training program handbook (per Branson and Stone
JJ[70],
Jessup J dissenting[71]).
The training program handbook contained certain of the misrepresentations found
to have been made.
That outcome reflected an
energetic understanding of the nature of the College’s activities,
notwithstanding its professed and – it
may be accepted – genuinely intended
benevolent purposes. The emphasis, dictated by the High Court of Australia’s
decision in Concrete Constructions (NSW) Pty Ltd v Nelson[72],
was upon whether in fact its activities or transactions had a trading or
commercial character.
In Concrete Constructions,
a construction worker, who was injured when he fell to the bottom of a shaft
because a grate was not secured, claimed damages for
misleading conduct
contrary to s 52 of the TPA by his employer through the foreman telling him
that the grate was secured. The Court
held that the foreman’s conduct was not
in trade or commerce because it did not have a trading or commercial character.
The medical profession appears to
have been at the forefront of regulators concerns about the professions in both
Australia and New
Zealand. For regulators, it seems that exclusionary
arrangements (although by no means the only issues) have been a major
anti-competitive
concern[73].
Typically these arrangements can relate to concerns over price negotiations
and recommended fee structures. Much has already been
written on this issue. [74]
In the recent case of ACCC v
Knight [2007] FCA 1011 contraventions of s 45 of the TPA and the mirror
provisions of the South Australian Competition Code were admitted by the
defendants (“Messrs Knight and Ross”).[75]
Messrs Knight and Ross were cardiothoracic surgeons practising in Adelaide at certain private and public hospitals. They had been
involved in the
supervision of a Mr Jurisevic, who had been in training as a cardiothoracic
surgeon. In 2001, Mr Jurisevic had been
admitted as a Fellow of the Royal Australasian College of Surgeons, and had completed all the statutory requirements
for eligibility
to be registered as a cardiothoracic surgeon (in all some 14
years training). He needed hospital accreditation as the final step.
It was
usual, but not mandatory, that such accreditation was given after an applicant
for accreditation had about two years of overseas
experience as well, but Mr
Jurisevic did not want to do that. In 2001, Mr Jurisevic sought his
accreditation. Messrs Knight and
Ross (who were influential members of a small
group of cardiothoracic surgeons) made an arrangement to hinder this process. They
did so by speaking to the relevant accreditation body, expressing their reservations
about Mr Jurisevic being suitably experienced
for accreditation and so to
conduct private practice. They supported this with written advice. Mr Knight had
previously supported
Mr Jurisevic’s application for Fellowship. In an unrelated
claim, also contravening s 45 of the Act, Messrs Knight and Ross invited
a Mr
Edwards, another cardiothoracic surgeon, to become party to an existing
arrangement between certain accredited surgeons which
was in essence an
arrangement whereby certain cardiothoracic surgeons would not fully compete
against one another so they shared
the market, by working in one of either
public hospitals and one of either of the major private hospitals.
Their conduct in both respects
clearly contravened s 45 of the TPA.
The Court proceeded on the basis
(as the ACCC had accepted) that Messrs Knight and Ross held genuine beliefs
about what was considered
appropriate in the context of Mr Jurisevic and Mr
Edwards; and that their actions were only deliberate in the sense of not being
involuntary or accidental.[76]
A pecuniary penalty of $55,000 was imposed on Messrs Knight and Ross
respectively, who were also ordered to attend a trade practices
compliance
seminar. Their conduct clearly created barriers to entry and a substantial
lessening of competition in a small but clearly
definable market. It is also
illustrative of the lack of awareness in the medical profession of competition
regulation.[77]
As for New Zealand, the Commerce Commission v The Ophthalmological Society of New Zealand Inc (2004) 10 TCLR 994 is a well known case. It concerned an
arrangement entered into by several ophthalmologists and the Ophthalmological
Society of New
Zealand which hindered a hospital in Invercargill from hiring an
Australian ophthalmologist, Dr Silva, in order to ameliorate the
effects of Invercargill’s
high waiting lists for cataract surgery. There had also been a prior
arrangement or understanding to a
lesser extent relating to another Australian
ophthalmologist, but the main conduct in question related to Dr Silva.[78]
The effect of the arrangement was that the Australian doctor was unable to
obtain the supervision required to enable him to practice
in New Zealand. Some of the parties to the arrangement then carried out the surgery which the
Australian doctor would have performed.
The Commerce Commission successfully
proved that the agreement breached s 27 of the Commerce Act.
In deciding
appropriate penalties, Gendall J gave a separate judgment: [2004] NZHC 1041; [2004] 3 NZLR 689.
The Court accepted that all of the parties to the arrangement were clearly
unaware of the potential to contravene the Commerce Act
though this did not
mean they had acted “innocently”.[79]
His Honour imposed pecuniary penalties of $NZ100,000 on the Ophthalmological
Society of New Zealand; $NZ25,000 on Dr Rogers and $NZ5,000
on Dr Elder, as
doctors involved in the contravention.[80]
Some doctors escaped liability.[81]
The Society’s penalty equalled the total sum of its entire assets. It has been
labelled a “stern” penalty in comparison to the “lighter”
penalties imposed on
the individual doctors.[82]
The case was not a test case but the first case involving professional persons
and their society.[83]
A planned appeal by the Society and doctors was discontinued.[84]
Price-fixing in the medical
profession has also in the past been a concern for regulators in both
jurisdictions, as a few select examples
illustrate. In 1997, the ACCC settled
an action against the Australian Society of Anaesthetists.[85]
The action alleged price fixing and boycotts in the form of an agreement to set
recommended on-call fees to be paid by private hospitals
to anaesthetists. In
the same year the Commerce Commission issued warnings to midwives and doctors
for their attempt to form collective
agreements covering payments for maternity
care in two unrelated incidents, because it risked breaching the price-fixing
prohibitions
of the Commerce Act.[86]
In 2001, the issue again came to
the fore with the ACCC’s action against the Australian Medical Association
(Western Australian Branch)
(“the AMA”) and Mayne Nickless Ltd, the controller
of the Joodalup Medical Campus. It was alleged that the AMA, by negotiating on
behalf of doctors at Joodalup Hospital, arrived at and gave effect to an
understanding to fix prices for medical services to be provided
at the Hospital.[87]
The AMA admitted the contravention and penalties were imposed. Curiously, Mayne
Nickless defended the action and was found not
to have contravened the TPA.
Similarly, in 2005, the Commerce Commission issued warnings regarding potential
price-fixing behaviour
to individual GPs who collectively
decided to set a maximum fee level for a specific group of patients.[88]
Professor Pengilley has said that
price-fixing and exclusionary conduct in the context of pricing arrangements by
medical practitioners
can give rise to the same anti-competitive result though it
may be effected by different means.[89]
The North American experience has
been not dissimilar.
Under American anti-trust laws,
medical professionals are subject to the restrictions imposed by the Sherman
Act, especially section 1 which governs collective action in restraint of
trade.[90]
Similarly, all professions, including the medical profession, are clearly not
exempt from anti-trust regulation.[91]
Specifically, section 1 prohibits conspiracies and agreements that unreasonably
restrain trade.[92]
It requires an agreement and/or conspiracy between parties that is intended to
harm or unreasonably restrain competition.[93]
It must also have actually caused injury to competition beyond the claimant,
and within a field of commerce in which the claimant
is engaged.[94]
Either a per se or a rule of reason analysis is used.[95]
Section 2 of the Sherman Act relates to illegal monopolization and similarly
requires proof of an anti-trust injury.[96]
The US Federal Trade Commission
and US Department of Justice work to enforce anti-trust laws, with the former
entity having a history
of “vigorously” pursuing violations of the prohibitions
on price-fixing in the context of professional medical associations adopting
fee schedules, and recommending or negotiating fees on their members’ behalf.[97]
This conduct has been considered per se unlawful in the US.[98]
Some conduct has even been criminally prosecuted by the Department of Justice.[99]
There is also a significant
degree of interest in exclusionary arrangements other than those relating to
price-fixing. For example,
in Hilton v. Children's Hospital San Diego, 2007
U.S. Dist. LEXIS 16517 (S.D. Cal., Mar. 7, 2007) the plaintiff alleged that an
agreement between the defendants, who were part
of a diagnostic radiology group
providing radiology services at Children’s Hospital San Diego, was (amongst
other allegations) a
violation of sections 1 and 2 of the Sherman Act.[100]
The agreement prevented radiologists from the University of California San Diego
Medical Center practising at the Children’s Hospital
San Diego by requiring
proof of competency in order to be entitled to certain practicing ‘privileges’.
The Ninth Circuit concluded
that “… [the conduct was] not undertaken in good
faith and in the interest of good health care, but as a ruse or cover to
obscure
a decision already made unlawfully to exclude her from an aspect of her
practice…”.[101]
However, the Court found that the plaintiff had failed to establish a critical
part of her case under both sections of the Sherman Act – that of the
existence of an anti-trust injury.[102]
Accordingly summary judgment was entered for the defendants.[103]
It is clear that section 1 of the
Sherman Act encompasses conduct including price-fixing, illegal
monopolies (akin to misuse of market power) and group boycotts.[104]
It is also important to note that specific types of anti-competitive
arrangements may also have other legislation in place to effectively
deal with
them. Such includes the “anti-kickback” statutes brought into play to prosecute
medical device manufacturing companies
involved in illegal kick-back
arrangements with doctors and hospitals in the US recently.[105]
A study commissioned by the
Federal Trade Commission and the Department of Justice in the US also indicates similar problems of heavy
regulation, information asymmetry and collective
bargaining for the medical profession, much like the situation in Australia.[106]
Canada does not appear to have had a similar focus on the medical profession. Section 45
of the Competition Act, ( R.S, 1985, C-34 ) prohibits conspiracy by way of agreement
or arrangement which unduly restrains or injures competition; and there are
also several
other circumstances which are sufficient to satisfy the section.[107]
Clearly, market power and market share are relevant to cases under s 45. Section
45 of the Competition Act was considered in Janelle Pharmacy Ltd v Blue
Cross of Atlantic Canada[108],
in which pharmacists unsuccessfully sued their health benefits insurance
provider.
Attention to the health
professions extends beyond general or specialist medical practitioners and
their associations.
Occupations within various
industries are pushing for recognition as discrete and emerging professions[109].
Apart from medical related professions, such as physiotherapy and psychology,
one is the natural medicine industry, commonly called
the
complementary and alternative medicine industry (“CAM industry”).
In Australia, there has been suggestion of self-regulation of the CAM industry as a profession, as an
alternative to subjecting it
to the statutory regulation akin to the medical
profession.[110]
Notably, the 2003 report of the Expert Committee on Complementary Medicines in
the Health System, commissioned by the Federal Government
at the time,
recommended self-regulation as well as government statutory regulation where
necessary for the CAM industry, amongst
other suggestions.[111] Despite this, there has only
been some degree of success in the push for professional recognition in the CAM industry[112]. The regulation of Chinese
Medicine professionals in Victoria has been established by statute. Under the
regime, practitioners
must have relevant qualifications as required by the
established Chinese Medicine Registration Board, amongst several other
regulatory
measures imposed.[113]
In New Zealand, the issue has
also been pushed by certain CAM organisations with similar suggestions of
statutory regulation for some
CAM occupations.[114]
The issue was raised generally in 2006 with the Ministry of Health releasing a
proposal put forward by the New Zealand Association
of Medical Herbalists that
herbal medicine become a regulated profession under the Health Practitioners
Competence Assurance Act 2003 (NZ) (“HPCA Act”), thus joining another 21
professions including medical practitioners and dentists regulated under the
legislation.[115]
The proposal was approved.[116]
The HPCA Act is similar to the Victorian enactment in that registration bodies
are set up via statute for professions under the
Act for monitoring of
qualifications and competence.[117]
In Australia, the ACCC’s concern in this area, as it continues to develop, is to ensure that
industries such as the CAM industry are
not implementing services in ways that
breach the TPA, particularly regarding their arrangements for
registration or recognition
of practitioners.[118] This issue is in its
nascent stages, but no doubt regulators will keep a watchful eye over any
progress that is made in the recognition
of CAM industry as a profession as
they do with other professions. It too has potential for complaints of
anti-competitive conduct
just like any other regulated profession.
By way of comparison, the US has extensively examined the CAM industry and its practitioners.[119]
In 1995, there was a suggestion that licensure laws and regulations were
limiting the CAM industry so that they fostered a medical
monopoly of the
market for ‘traditional’ medical practitioners by restricting the scope of
alternative practices and access to them
by consumers.[120]
This in turn was said to increase costs for consumers.[121]
Despite such concerns, access to a range of CAM practitioners by consumers has
increased.[122]
It appears to be an incremental ongoing increase.[123]
It is really a question for economists as to whether regulation of the medical
profession leads to the same effect, namely increased
costs to consumers. As
the medical profession is regulated in a similar way to the CAMs professions in
the US (including by government
statutory schemes or “statutory self
regulation” as its known in the US)[124],
and there has been a continuous rise in the use of CAM professionals even
though very few are recognised as regulated medical professionals[125],
it may be hypothesised that the same conclusion should be reached. Australia still apparently intends to maintain some level of
government regulation of the CAM providers.[126]
It is desirable to refer briefly
to cartels in the context of the professions.
Cartels are not a legally defined
term in either of the Acts. In both Australia and New Zealand, they are
typically used to describe
arrangements that result in price-fixing, bid
rigging and market sharing.[127]
Clearly, professions may engage in unlawful cartel behaviour, if they are
unwise enough to do so.
Regulators in both Australia and New Zealand have taken a tough stance on cartel behaviour. The Commerce Commission has
publicly declared
that “price-fixing cartels will not be tolerated”[128]
and “New Zealand is a country where
the cartel participants should never feel safe…[w]herever cartels may be, the commission
will
use all the tools at its disposal to discover, pursue and attack them”.[129] The epitome of the ACCC’s
stance is demonstrated in the media fanfare surrounding the case ACCC v
Visy Industries Holdings Pty Ltd (No 3)[130],
and in its support for the proposed criminalisation of cartel conduct. [131]
A notable difference between Australia and New Zealand is that New Zealand apparently has no plans to criminalise cartel conduct[132].
New Zealand’s stance is also out of step with the US and the UK where imprisonment terms may be imposed for cartel behaviour.[133]
New Zealand’s reasoning for not following
the trend towards criminalisation of cartel conduct was stated in a 2001
review.[134]
This inquiry found that imposing a higher criminal standard, with imprisonment
terms for offenders, was likely to lead to fewer prosecutions
and a reduction
in the number of successful cases, particularly given the higher onus of proof
in criminal cases and the right against
self-incrimination.[135]
Optimists, however, have not ruled out a change of perspective for New Zealand on the criminalisation issue.[136]
There are obviously contrary views. As summarised in an OECD paper, Canada is
of the view that corporate fines alone are not sufficient
to deter cartel offenders
but that it is the dual threats of effective investigation and class action for
compensation, coupled with
the risk of imprisonment, that is most effective to
deter in.[137].
The US holds similar views, accepting however that the continued existence of some
cartels is not evidence of imprisonment failing
as a deterrent.[138]
Australia is clearly adopting the
mainstream approach. The recently proposed legislation aims to amend the Act
and introduce cartels
as a legally defined term.[139]
It is proposed that there be criminal sanctions for cartel conduct introduced,
conduct which is described in the media “hardcore
cartel conduct”.[140]
The Bill aims to introduce two criminal offences for cartels under Part IV of
the Act - namely the making of, as well as the giving
effect to, a cartel
arrangement.[141]
Several other changes proposed related to the way cartel investigations are
conducted and also to civil offences.[142]
However, the draft Bill has been
criticised for being extremely complicated.[143]
One of the most critical observations concerns the “dishonesty test” or the
concept of “intention to dishonestly obtain a benefit”.[144]
Beaton-Wells and Fisse have argued the test is not sufficient to enable the
distinguishing of criminal from civil offences.[145]
This is because dishonesty is likely to be present in many civil penalty cases
and is not a “hallmark” of criminal cartel behaviour.[146]
Heerey J has argued that the dishonesty element contained within the Bill
“opens up an infinite field of subjective and value laden
factors”.[147]
His Honour has said that the concept should be removed from the proposed
reforms and that the US experience (which does not contain
any such concept)
ought to be adopted.[148]
Obviously, criminalisation of
cartels should ring strident alarm bells for the professions. Unlike civil
penalties or other civil
remedies, which do not necessarily constitute conduct
warranting professional disciplinary conduct, a criminal conviction related
to
the practice of a profession should do so. And, as Beaton-Wells and Fisse
pointed out, the investigative resources of the ACCC
are very extensive,
potentially very intrusive, and obviously when exercised will be very
disruptive to a professional’s practice.
They include powers to obtain a
warrant to use surveillance devices (including listening, optical and tracking
devices) under the
Surveillance Devices Act 2004 (Cth) (“the SD Act”).[149]
That power would be available because the proposed offences, with maximum 5
year imprisonment terms, would fall within the scope
of the SD Act.[150]
Surveillance devices under the SD Act can be used in respect of conversations,
activities or locations of certain persons.[151]
Various warrants under other Commonwealth Acts may also potentially be utilised
for similar purposes by the ACCC for similar reasons.[152]
This is comparable to interception powers possessed by regulators in other
jurisdictions.[153]
It is reasonable also to question whether professions with their claimed focus
on public service (with obligations of trust and confidence)
ought to be more
concerned about this consequence of the proposed reforms.[154]
A number of the “non-traditional professions” are generally aware of the potential
impact of the proposed reforms in Australia.
Submissions have been made by
professional associations or representative bodies during public consultation
period for the proposed
Bill.[155]
On the issue of the interception powers, the Fair Trading Coalition raised
general concerns and the Australian Banker’s Association
was more explicit in
its opposition to it, specifically referring to privacy issues.[156]
There has been an apparent lack of response by some of the “traditional
professions”, such as the medical profession.
Some observations
There are at least two questions
which that review of competition law and the professions in New Zealand and Australia throws up.
There may be many more. But the two which provoke my interest
are:
(1) whether there is anything inherent in the professions which has any
particular significance to the application of competition
law regulation to
them;
(2) whether the application of competition law regulation to the professions
has changed the nature (I hesitate to use the word
“integrity” of the
professions) in any significant way.
Among the other questions which
might be asked is whether the application of competition law regulation to the
professions has been
in the public interest: that is the “net public benefit”
of its application. In many respects, that is a multi-faceted question
more
for economists or other particular specialities. The intuitive answer is
affirmative.
Let me list a few of the facets:
- price fixing (to the extent the
professions engaged in it) is clearly against the public interest;
- barriers to entry may have been
lowered, but is there any evidence that the lowered barriers to entry have
reduced the quality
of any professional services, or have so reduced them
that acceptable outcomes to the community are not being met or are at
issue?
- have work performance
restrictions been lifted to an extent that has exposed the community to
unacceptable outcomes?
- has the information to consumers
been improved, so that more informed consumer choices can be made?
Whilst my intuitive answer to
those questions is an affirmative one, I can at least add my experience in
proffering a more positive
answer to such questions in the case of the legal
profession.
In Australia, the legal
profession, either institutionally or as individuals, has not been the target
of any proceedings under Pt
IV of the TP Act. Nor has it sought authorisation
in the public interest for any of its structures at an organisational level.
The latter part may in fact be because it is regulated by separate State and
Territory legislation. Following the Hillmer Report,
each State agreed to
implement the National Competition Principles. They have progressively
implemented those principles through
amendment to, or the enactment of fresh,
Legal Practitioners Acts. Consequently, and not surprisingly, the
organisational structure
of the legal profession should not be, in competition
terms, of serious concern to the regulator.
One feature of the legal
profession is that it has supported the entitlement of any qualified secondary
student to study and obtain
a law degree. I suspect the same is true in New Zealand. The number of those with law degrees is limited only by the capacity of
Universities to accept and teach the elements of such degrees. There are
apparently reasons why Universities have been prepared
to expand the intakes of
their law schools, or to establish new law schools, but still the matriculation
cut-off marks are high.
Admission to University Law Schools is based on
objective criteria.
A law degree, to be acceptable to
an admitting authority, must have certain content. That is prescribed by the
Law Admissions Consultative
Committee. It is a body established by the Chief
Justices of the High Court and of the State Supreme Courts (as they ultimately
are the admitting authorities). Its views are then imposed by the State
admitting authorities (SAA), constituted under the respective
State
enactments. In the case of overseas lawyers (putting aside New Zealand), their degrees and experience are assessed to determine
if they meet the LACC
conditions. Most often, in Australia, they do not satisfy the requirement of
adequate knowledge of Australian
Constitutional Law – part of our “elephantine”
attributes.
The other requirement for
admission is a satisfactory level of practical legal training. Those courses
of PLT are accredited by the
local SAA, on an objective assessment, and there
are several competitive providers of PLT throughout Australia. To date, those
providers
have been able to accommodate all with appropriate law degrees who
wish to undertake a PLT course.
So, to that point, despite the
special skills and knowledge required (I mention that legal ethics is a
mandatory LACC unit of a law
degree), there are no possible contrived barriers
to entry.
Generally, there are conditions
upon practise of the law for a period of two years after admission. The
admitted lawyer may not practice
as a principal for that period. Such
conditions are imposed by the SAAs under Rules made by delegated powers from
the relevant State
legislation. They have the support of the legal profession.
Upon admission, by prescription
of the SAAs under delegated power, there is in most States a requirement for
post-admission continuing
legal education (CLE). It is not onerous. There are
a range of providers of CLE.
If I were to “nitpick”, I would
inquire further whether the requirements for PLT, and the short post-admission
restrictions on practice,
and mandatory CLE are each in the public interest.
They have a clear purpose, and an obvious attractiveness. I am not aware of
any qualitative assessment of the balancing between their benefit and any
impact upon competition in a relevant market which they
have. Importantly,
from the point of view of the legal profession, those requirements are not
self-generated or self-imposed. They
are imposed through State legislation.
And the legal profession, broadly speaking, regards itself as over-regulated
rather than
the reverse.
Lawyers admitted in any State of
Australia may now practise in any other State of Australia – again, an
observation which you no doubt
find anachronistic.
The reservation of work to
lawyers is perhaps more contentious. It is, as you would be aware, expressed
in a traditional way. There
is a range of traditional “legal work” which may
be performed by others: licensed conveyancers is an obvious example, but so
too
(I am very quaint) is the tax advice provided by accountants. The
intersection of the work of accountants and lawyers is increasing,
apparently
without the concern – other than in the competition for work – of either
profession. Nevertheless, there are two questions
which have been raised:
(1) Is it “necessary” (a compendious word to describe the balancing of
interests to determine the public interest) for all lawyers
to satisfy the LACC
units for a law degree before admission, a matter of increasing significance in
a time of more and more
specialisation? That is a question which, in the
future, I am sure will continue to be debated.
(2) Is there a shared characteristic of the legal profession to continue to
justify the existence of rules which apply across the
board? This is not
simply a product of specialisation, but also – as both New Zealand and Australia have developed – because there
may be two (or at least two) legal
professions with different characteristics, and so different elements which
might justify
regulation in the public interest. The legal profession largely
comprises “the big firms” and “the small firms” (or individual
practitioners).
(I shall refer to the barristers shortly.) They really now service different
markets, because the larger firms
are so structured that they cannot afford to,
or cannot compete, in the “traditional” client market. They compete for work,
both nationally and internationally (where the particular jurisdiction permits
it), from government and large corporate or individual
clients. Their
competition for work is fierce – both on price and quality and service – and
they deal with clients who are well-informed
and well able to assess the value
of the services rendered (often, partly, through in-house lawyers). They
jointly tender for
work with other professions on some occasions, and they work
co-operatively with other professions because the market demands no
less. The
other part of the legal profession – servicing the “traditional” client
(individuals and smaller businesses) is quite
different. Clients are generally
unable to be much informed about relative quality, comparative charging,
expertise of the legal
supplier or such matters. In such instances, however,
there is little or no professional institutional structure which impedes
the
flow of information – it is inherent in the nature of the work, and so there
are professional expectations imposed by professional
bodies (and by
regulation) to better inform consumers: fee disclosure, pre-engagement letters
with cost estimates and the like.
Advertising generally, including as to fees,
is not prohibited (except in New South Wales, by statute). Different methods
of
charging are not generally prohibited (except that it may be unprofessional
conduct to overcharge).
So, in that area, the legal
profession also does not appear to be structured, or to impose rules, which
might be of particular
concern to regulators.
Longer term, the extent of
exclusive reservation of work to lawyers may come under further scrutiny: it
will only be able to be maintained
to the extent to which it can be shown that
there is no other group of providers of that service who can do so with equal
skill (i.e.
properly trained) and with equal quality in service and service
assurance (i.e. insurance against error in performance). The legal
profession
has a mandatory level of insurance against claims, and to date has persuaded
government that competitive providers should
be equally insured. Maybe the
question of compulsory insurance is one which might merit revisiting as an
appropriate requirement
of practice?
Within the legal profession,
there was considerable debate in the 1990s about the institutional reservation
of work for barristers
in some of the States. That is no longer so. In my
State (South Australia), and in Western Australia, that was never so: it was
a
“fused” profession. In reality market forces have produced the same outcome –
the ratio of those choosing to practise solely as
barristers to those
practising as solicitors was (and remains) much the same in the “fused” and
“non-fused” professions and despite
the right of any solicitor in the
“non-fused” States to appear as counsel, they rarely do. I do not think it is
a competition issue.
Nor, now, is there a competition
issue about the structure of legal practices, except in one regard. Legal
practices may incorporate.
They may be listed on the Stock Exchange (with some
requirements that those making legal decisions are properly qualified and
professionally
accountable), at least in some of the States. If those
structures are not widespread, it is because the State governments – rather
than the profession – do not want them. The remaining issue is
multi-disciplinary partnerships. There are issues in such circumstances
about
how client legal privilege should be preserved, and how the duty to the Court
above the duty to the client, is to be preserved.
That is an ongoing work in
progress, both for commercial reasons and for competition reasons.
The legal professional
associations act as lobby groups for collective legal interests, but not in
areas that (so far as I am aware)
are seen as sensitive by the ACCC. They
provide educational services. They provide the opportunity for knowledge and
experience
sharing. They facilitate informed professional responses to
proposed legislative reforms. And, to a diminishing extent they perform
disciplinary investigative and prosecutorial functions.
All that indicates, in my view,
is that the legal profession is not structured, or behaving, in such a way as
to attract the interest
of the competition regulator. Indeed, as the legal
profession is in the vanguard of awareness of the provisions of the TPA – and
its relevant practitioners deeply immersed in it – it would be surprising if it
were otherwise. It is also, as a matter of practical
reality, a highly
competitive profession in the markets in which legal services are provided.
Those comments direct my focus
back to the two questions I posed at the commencement of my observations. In
the case of the legal
profession, I think the answer to both those questions is
“no”. If I am correct in my view that the legal profession is not only
vigorously competitive among its members, but in the areas of overlap between
legal services and other professional services, then
it can be seen to have adapted
effectively to the environment in which it has been exposed – the world of
competition. There is
nothing inherent in its nature tending to dictate that
competition law regulation should not apply to it. Moreover, so far as I
am
aware, there is nothing in its “key ideas” of service and independence which
the application of competition law regulation has
altered. The “key ideas”
remain. They may not necessarily be as vibrant as they once were. But we live
in different times, with
different or greater pressures. One needs only to
look at the nature of the work the larger firms perform and how they are
structured
to perform it to make that point. The large firms, by and large,
have preserved their legal integrity, some very deliberately so,
and they engage
in a range of community and other pro bono work reflective of their awareness
of their obligation of service to the
community. Individuals and smaller firms
continue to work for their clients, again by and large, with integrity and the
deep commitment
which comes from the awareness of trust and responsibility they
shoulder by reasons of the “information imbalance” their profession
carries.
And lawyers do legal aid work, duty solicitor work, and a host of other pro
bono legal services.
Although I do not have anywhere
near the same depth of knowledge of other professions, it seems clear enough
that professions such
as architecture, engineering, accounting and – if they
are to be included – real estate agents have absorbed the impact of the
application
of competition law regulation. And they have done so without
apparent difficulty, or without apparently impairing their status as
professions. Indeed, the TPA reports on the accounting and architectural
professions did not even in 1992[157]
identify matters of significant concern.
So what is it about the medical
profession, and related disciplines. The earlier discussion in this paper did
not focus on the interest
of the competition regulators in the medical
profession as my choice from available professions to discuss. It was a result
of a
fairly thorough review of the material available in New Zealand and Australia generally addressing the professions and competition
law.
Why does the medical profession
feature so prominently in the available material? Does it have special
characteristics? What are
they?
It is not apparently different
because of information asymmetry. Its consumers are certainly disadvantaged in
assessing the price
for, or quality of, services to be provided. That is true
of all professions. Indeed, of all, the legal profession is probably
the one
where the consumer is at most disadvantage in this respect because flawed
outcomes are generally less obvious; the prospects
of success in litigation is
inherently difficult to assess as there are so many uncontrollable variables.
Nor is medicine different
because the element of trust and reliance by the
consumer is exclusive to it. Perhaps there is a greater awareness of service
than
in other professions, because of the nature of the medical profession. It
relates immediately and often critically to the health
and personal integrity
of the user/patient. But “service” is an individual response to a professional
expectation. Some professionals
(whether doctors or lawyers or others) are very
conscious of that professional responsibility; their dedication and commitment
is
greatly to be admired. Some are less so, or indeed not so at all. A
medical practitioner, like any other professional, seeks to
provide services to
the utmost of that professional’s ability, whether for altruistic or financial
or reputational or personal reasons,
and (I suspect) most often a combination
of those things. And, like any profession, there are those who will lapse over
the wrong
side of the competition line to preserve their personal interests.
So, upon reflection, what I
perceive to be the fundamentals of a profession are not peculiar in any
relevant way to the medical profession
and like disciplines. I do not place
self-regulation in the basket of features necessary for the existence of a
profession, for
the reasons given, or at least not as a feature occupying much
space in that basket.
The medical profession, perhaps
unlike other professions, has a process of qualification – whether for a
primary degree or for specialist
qualifications – which restricts the supply of
services. It is notorious how difficult it is to secure admission to a medical
course
in a University. There are probably a few reasons why the intakes are
so low, relative to other professions. One may be the relative
cost of
education of a medical student. Another, and probably more importantly, is the
limit upon the number of students who can
be given the necessary practical
training. That feature, at least anecdotally, applies also to the dental
profession. The restricted
number of training places is also a justification
for the restricted number of specialist training positions available, although
obviously that varies within each specialist discipline and the size of the
community which it serves. It may be an entirely coincidental
benefit that,
the smaller the number of specialist practitioners, the greater the potential
for increasing the returns to the practitioners.
A focus of regulators has been,
and no doubt will continue to be, upon those structures to ensure that they are
not used as a means
of limiting competition in a market.
That observation is reinforced
when it is appreciated that, unlike most professions in New Zealand and
Australia, entry to the medical
profession and to each of its specialities is
by registration – controlled by the profession or the relevant sector of it
(even if
authorised to perform that role by statute) – based upon
qualifications, training and experience (and assessment by a peer group).
Generally,
other professions have entry by licensing once specified training requirements
are met. And there is no real issue about
places being available for those
seeking that training. The accounting profession has “entry” by certification,
but that only operates
as an assurance to consumers about the competency of the
provider; it does not stop non-certified persons from providing accountancy
services. And, finally, the medical profession clearly has a much more refined
and elaborate system for specialisation. For obvious
reasons, unlike any other
profession, specialist services may only be provided by recognised specialists
in the particular discipline.
As I have observed, at least anecdotally, the
opportunities to qualify for registration as a specialist provider are
apparently limited
for practical reasons. Other disciplines variously
recognise specialists, but not so that they only can provide particular
services.
The demand for specialist accreditation by other professions is also
more readily capable of being met, because the required training
is more
readily available.
I do not ascribe to the medical
profession any base motives. Quite the contrary. But the reasons why it has
been the focus of attention
are clear enough: within its existing structures,
it is the clash of the practically achievable (or perceived practically
achievable)
with the ideals of competition policy. I do not think there is any
inherent quality of the medical profession which, in theory,
renders it any
less vulnerable to exposure to competition law regulation than any other
profession. The regulators may be expected
to continue to review the propriety
of the structures of that profession, and if they are accepted, the balance now
struck by those
structures, with some care in the future.[158]
A concluding remark: The theme
of my remarks about competition law and the legal profession does not lie
easily with the views of
Professor Hatfield. There are important differences
in our views. I hope they are explained by understanding the different
structure
of the profession in New Zealand and Australia, including the
relatively limited roles of the New Zealand Law Society and the Law
Council of
Australia compared to the American Bar Association. I have referred to that
earlier in this paper. Apart from referring
to certain “scathing” critiques of
the organisation structure and rules of the legal profession in the US[159],
she identifies a straw man the “lawyer-statesman”[160]
as the justification for the professional rules in the US and then says that they are no longer justified because the “lawyer-statesman”
is now a
mythological being. There is no such person used by the legal profession in New Zealand or Australia to uphold the current
structures and rules. Indeed, as I have identified
above, there remain some areas of real interest to determine the extent to
which
competition law might further impact upon the practice of the law.
More importantly, and more
directly relevantly, Hatfield rails against the “enormous complexity and quantity
of legal effort” to achieve
the “transactional and dispute resolution goals of
business entities”.[161]
Rightly so. However, I do not agree that that is the consequence of the
profession’s regulatory structure in New Zealand or Australia.
I have not seen
it suggested in our literature. I do not understand why it should be so here.
There are alternative dispute resolution
models already available in our
jurisdiction. It is unclear whether other models provide cheaper or better
dispute resolution processes
or transactions. Personally, I hope the
State-provided system continues to be used by the community. But we must be
resourceful
in revisiting our dispute resolution processes to ensure they are
as efficient and as economic as can be consistent with the interests
of
justice. That is not the topic of this paper.[162]
Finally, I note that Hatfield
regards the “legal products market” not simply as what lawyers supply, but also
as what judges do.[163]
To a degree, that is correct because Courts make the Rules of Court and produce
judgments construing contracts, determining facts
and applying the law. This
paper is not a critique of Professor Hatfield’s paper, although there is much
of it with which I disagree
or which I think is based upon structures not applicable
in New Zealand or Australia. But, the suggestion that judges should be
regarded as part of the legal professional market and so be “restructured” in
some way is a little alarming.
Perhaps the concluding section of
her paper gives me (and all of us) some comfort. She refers with explicit
approval to the “sweeping
reforms” adopted in the UK in 2007.[164]
Those reforms reflect very largely the reforms to the Australian (and I assume
the New Zealand) legal profession since 1995. The
fact of the earlier reforms in
our jurisdictions has gone unremarked.
Appendix
Other
materials touching upon matters addressed in this paper which provided useful
background include:
1. The
Legal Profession
- Barton B, “An Institutional Analysis of Lawyer
Regulation: who should control lawyer regulation – courts, legislatures or
the market?” (2003) 37 Georgia Law Review 1167
- Burton M, Lawyers and Conveyancers Bill (Third Reading
Speech, 14 March 2006) available at
- Competition
Bureau, Self-regulated professions - Balancing competition and
regulation (Competition Bureau Study, Canada, 2007) at 61-79,
available from
- Council of Australian Governments Legal
Profession Reform Working Group, Reform of the legal profession in Australia : report to the Council of Australian Governments (1996)
- Fels A, Regulation,
Competition and the Professions (Industry Economics Conference,
Melbourne, 13 July 2001) at 15-19, available from
- JS Douglas QC, Economic Reform of the
Legal Profession (speech to the University of Queensland Economics Alumni and Law Graduates Association, 12 October 2000)
available from
- Law Council of Australia, 2010: Discussion Paper -
Challenges for the Legal Profession (LCA, Canberra, September 2001) at
ch 7, available from
- Nguyen-Hong D,
Restrictions in Trade on Professional Services (staff research
paper, Productivity Commission, Melbourne, 2000) at 34-43 available from
- Parker C,
Competing Images of the Legal Profession: Competing Regulatory Strategies (1997)
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