The Threat to U.S. Lawyers from Competition by Multidisciplinary Practices (MDPs): Is it Gone?

Abstract

The threat perceived by U.S. lawyers and law firms arose in the late 1990s, when the "Big 5" international accounting firms began acquiring law firms in Europe and announced plans to provide legal services to clients globally through multidisciplinary practices (MDPs). Such practices offered clients the convenience of "one-stop shopping" and the backing of well-financed, worldwide organizations. Responding to concerns of many in the legal profession regarding competition with accountant-led legal practices; recruitment of law school graduates by accounting firms; sharing of revenues by lawyers and non-lawyers; potential conflicts of interest by MDPs; and other issues of ethics, the American Bar Association (ABA) established a Commission in 1998 to review the situation and make recommendations. The Commission's recommendations-- to allow lawyers to work in MDPs and to share revenues subject to certain safeguards-- were rejected by the ABA House of Delegates in 2000. This paper traces developments affecting the competition since then, including stricter regulation of the accountancy sector in the United States following the Enron accounting scandal; the collapse of Arthur Andersen, reducing the "Big 5" to the "Big 4"; spinoffs of consulting arms of accounting firms; international growth of law firms; and the weakening of accountant-led MDPs in many countries. The paper concludes that the imminent threat is greatly diminished, but not completely gone. It points out that accountant-led MDPs still exist along with networks of law firms tied to accounting firms and that the trend toward MDPs could be revitalized some day, considering the demand for "one-stop shopping" and legal reform legislation on the horizon in the United Kingdom, which could allow ownership of law firms by non-lawyers and by public shareholders, serving as a model for similar regulation in other countries. In the meantime, laws and regulations in the United States and other countries that restrict lawyers from working and sharing fees with non-lawyers and measures that limit ownership of law firms and other professional firms continue to serve as impediments to the growth of competition and consumer choice.

Keywords: competition, business organization, law firms, accounting firms,multidisciplinary practice, globalization, regulation, professional services