As the gap between the haves and the “have-not-nearly-as-muches” continues to grow in the American legal landscape, the global outlook for law firms turns dim as mid-tier international players, and for that matter the elite players, come to grips with the threat posed by the Big 4 accounting firms rolling into the legal market and pushing out the competition. Nowhere is this threat more palpable than in Asia, where the Big 4 are making their most aggressive push, leveraging client connections on the auditing side to drive complementary work to their growing legal services wings. And it’s only a matter of time before they come for the rest of the world.
In a report for International, John Kang and Anna Zhang check in on the Big 4’s expanding legal foothold in Asia and the ominous advantages the accounting firms bring to the table. Back in February, we flagged Asia as the market to watch for this trend, with the Big 4 keying in on its preexisting client relationships in these booming markets as a prime entry point for global legal dominance. The accounting firms have more resources — roughly 10 times more revenue than the biggest global law firms — and strong brand recognition among the Asian companies that will, eventually, want a partner to counsel them on moving into other markets.
But, as the International piece points out, there are some Biglaw attorneys who see some dirty pool at play:
“There are serious questions of fair competition and ethics when the Big Four audit most of the Am Law 200 law firms and then directly compete against us for client engagements,” said David Tang, Asia managing partner for K&L Gates.
“They know our finances and our financial arrangements with clients; they then compete directly for the same engagements with the same clients and compete on fees, knowing what we have done,” Tang said. “Law firms are used to competing in the market, but not when the new entrants are competing unfairly.”
A more cynical person might point out here that this is what you get when you allow a market to shrink to a global oligopoly, but there’s no use crying over spilled milk when you could write it off. But lawyers and lobbyists around the world have done their part to keep the Big 4 free of the sort of regulatory scrutiny that could bring back some needed competition and now they’re getting beaten back by behemoths of their own making.
At least at this point, the Big 4 don’t seem interested in fully supplanting the Biglaw firms:
Stefanie Yuen Thio, joint managing partner of Singapore-based TSMP Law Corp., said the Big Four’s legal offering is often an add-on to their accounting and tax work. “It is to defend their client base and prevent work from leaking to other firms,” she said. “They are not planning to be the very best law firms. They want to be the most seamless accounting firm.”
KPMG’s Wolfers said its planned law firms do not seek to be full service. “We’re a specialist firm in the areas that are directly complementary with KPMG’s businesses and services.”
That should make some litigators happy. But how does a full-service Biglaw firm compete when it’s getting outmuscled on highly profitable transactional work. It’s all well and good to stay out of certain practices, but if the practices they choose to enter wind up undermining the Biglaw financial model as a whole, it’s no better.
For now, Biglaw firms seem content to lean on the fact that the Big 4 can’t practice law in the United States. Can lawyers really rely on that in the long-term? In 10 years, when PwC represents a gaggle of China’s richest countries seeking to acquire American companies, will the gatekeepers of American law still be willing to shut them out?
Law Firms Uneasy as the Big Four Make Their Big Push in Asia [International]
Joe Patrice is an editor at Above the Law and co-host of Thinking Like A Lawyer. Feel free to email any tips, questions, or comments. Follow him on Twitter if you’re interested in law, politics, and a healthy dose of college sports news.