Jeremy Newman’s comments in his online blog over how BDO Stoy Hayward was muscled out of a contract by a Big Four firm have raised questions about whether the top firms frequently lower their prices to steal contracts from under the noses of smaller firms.

Newman asked whether this practice could be seen as ‘unfair competition’ after a Big Four firm, which initially pitched its fee at over £600,000, brought it down to just £220,000 and won the contract even though it was still £20,000 higher than BDO’s quoted price.

Newman told Accountancy Age that it was an indication of the extent to which some companies would go to have a Big Four firm do their audit work.

It is a point worth considering especially since Newman’s blog suggests that it was the European parent company that pushed for its UK subsidiary to obtain the work from the Big Four.

If true, it could be seen as institutional prejudice – and certainly the point Newman wished to bring out into the open.

The issue it raises is that BDO may have to deal with institutional prejudice against its foreign firms, and not just at home.

Newman further asked whether this could be a case of ‘predatory pricing’ by a Big Four firm.

However, legal experts have poured cold water on the story, saying it is an isolated incident.

Kathryn Cearns, consultant accountant at law firm Herbert Smith, said there was no evidence that such incidents happened widely in practice.

‘It’s very difficult to take an isolated example out of context and draw conclusions that there is unfair competition or predatory pricing. One would need to look more systematically across the market. We’ve not seen any evidence of predatory pricing by the Big Four,’ she said.

Hardeep Nahal, also of Herbert Smith, said that cases of predatory pricing usually began as a result of a company trying to drive down audit costs.

‘This would happen when someone has sustained a campaign to drive down prices across the board. But this is an isolated example and therefore difficult to draw too many conclusions from,’ Nahal said.

Cearns pointed out that the Competition Commission had undertaken studies into predatory pricing in the accounting market and found no evidence of it.

‘One can’t restrain companies from choosing whose services they will opt for,’ said Cearns.