Competition and self-regulation of the professions

By Simon Longstaff

A version of this article was first published: as excerpts from article submitted for publication to The Australian Law Journal - December 1994

To what extent should competition policy be applied to the conduct of the professions?

On the face of it, this is a simple question to answer. Yet, any attempt to offer a serious answer must flow from the consideration of some very deep matters. Not the least of these will be an exploration of the foundation for the social compact that underpins the very idea of a profession.

It is therefore a matter of some regret that the debate is so often caricatured in terms of stark opposition between zealous competition-wallahs, on the one hand, and selfish conservatives on the other. Despite the fact that the reality of the debate is far more sophisticated, this lingering sense of a clash between ideology and privilege still prevails in the accounts of commentators (and the minds of many in the community).

I suspect that part of the blame for this might lie with the protagonists who seem quite prepared to bicker over points of detail while only occasionally turning to more fundamental questions. It is therefore my intention to sketch an outline of some of the pressing issues that I think to be deserving of greater attention. To attempt such a task is to court dissatisfaction from one's audience. Those looking for practical guidance will disapprove of too abstract considerations, and those looking for theory will despair of the cursory manner in which concepts are deployed. So, having acknowledged the risk, let me proceed.

Associations, occupational groups and professions

The professions do not have a right to exist. They are not the product of a law of nature. Nor is their existence a curious metaphysical fact that one must necessarily take into account when contemplating the cosmos. Rather, the professions are a social artefact.

There could be thousands of people with a superb knowledge and understanding of the relevant disciplines and still be no professions as such. Individual practitioners might attract clients willing to recognise and pay for their learning and skill, but this would not make for a profession. Indeed, for there to be a profession at all it would first be necessary for people to come together in order to form some sort of voluntary association. The trouble is that not all associations are allowed to survive, let alone flourish. For longevity, one or more of the following conditions need to apply (the list is indicative and not exhaustive):

Internal conditions

1. there continues to be a raison d'etre for maintaining the association,
2. the membership of the association remains committed to its preservation,
3. there is a decision-making process capable of resolving and managing internal disagreements, of charting new directions and so on.

External conditions

1. the new association is relatively insignificant and therefore escapes attention,
2. the new association is conceived by society as an expression of itself,
3. the new association is perceived to offer no threat to society,
4. the new association is believed to offer positive benefits to society,
5. the new association is under the protection of some power sufficient to shield it from attack,
6. the new association is sufficiently powerful to ward off any attempt to curb it.

As noted before, the conditions outlined above are not mutually exclusive. Indeed, it is quite possible that a fledgling association will pass through a number of phases in which its status changes. One imagines that a history of the professions would reveal just such a progression. But this is beside the point. The chief fact to bear in mind is that the existence of an association is a contingency and not a necessity. A sufficiently powerful force can obliterate it at any time. Alternatively, it can destroy itself through implosion, collapsing when internal supports have decayed. The facade may stand awhile, but it too will eventually fall.

Of the external conditions, except in the application of conditions five and six, the association will depend on the good-will (or indifference) of the host society. One can imagine societies in which a powerful protector might be minded to guard the interests of an association. And it is possible to think of groups having sufficient power to protect themselves. However, all of this is quite academic when it comes to understanding the place of associations in a modern democracy such as we find in Australia today.

Given the sovereignty of the people, the community has the power to dissolve associations as and when it may desire. Constitutions and Bills of Rights offer only limited protection as they may be amended according to the popular will. Of course, it could be argued that the selective abolition of certain associations would be ‘undemocratic’. This may be true. However, it is a curious feature of democracies that they enjoy the capacity to act undemocratically. The only penalty they might suffer is the sting of criticism from those who are concerned to promote authentic democratic consistency. The charge of bad-faith might stick. But short of some external power imposing sanctions, there would be little to prevent such a course of action being followed.

The social 'compact'

While a society might be expected to tolerate all manner of associations as a proper expression of a commitment to the principles of liberty, it is a little more difficult to see why it should allow any group, defined by a common occupation, to enjoy privileges not available to other occupational groups. A moment's reflection will lead one to conclude that a society founded on the idea of the formal equality of all can accept only two reasons for positively discriminating in favour of one group over another. The first is to redress some acknowledged wrong, the second (which it might be argued entails the first) is to promote the interests of the community as a whole.

For example, it is accepted by most people that the community would suffer if I had the right to perform open-heart surgery on my kitchen table. Instead, the right to perform such operations is restricted to those properly qualified and registered as medical practitioners. Similarly, it has been concluded that society would suffer if each individual was permitted to take the law into his or her own hands. Civil peace is thought to be enhanced if a properly accountable State is able to exercise a monopoly in the administration of force. Thus, powers of arrest are limited. An impartial cadre of judges supervises the trial of alleged offenders and the State (on behalf of the community) punishes the guilty.

None of this is controversial. At the heart of the position described above is the idea of a social compact made between society and particular occupational groups and associations. Certain privileges are accorded in return for the provision of social goods that would not otherwise be available. It is within this general scheme of arrangement that an understanding of the role of the professions in Australia must be located.

The idea of a profession

There is, however, another dimension to the discussion of professions. Rather than flowing from a consideration of the external environment in which the professions are sustained, this other dimension relates to what have been held to be the internal standards of a profession per se. One can observe that all manner of occupational groups can make bargains with society in return for privileges or other social goods and yet still not be considered to be professions. For example, parking meter officers have special powers not normally conferred on ordinary citizens. Yet, to be a parking meter officer is not to be a member of a profession. So where does the distinction lie?

One particularly influential definition of a profession was offered by Roscoe Pound. It goes as follows(i):

The term refers to a group ... pursuing a learned art as a common calling in the spirit of public service - no less a public service because it may incidentally be a means to livelihood. Pursuit of the learned art in the spirit of public service is the primary purpose.

The point should be made that to act "in the spirit of public service' at least implies that one will seek to promote or preserve the public interest. A person who claimed to move in a spirit of public service while harming the public interest could be open to the charge of insincerity or of failing to comprehend what his or her professional commitments really amounted to in practice.

In August of this year, the Australian Council of Professions issued a discussion paper, Professional Services, Responsibility and Competition Policy (ii). Significantly, a press release about this paper was issued under the title, In The Public Interest. Both the paper and the release sought to distinguish a profession from "more commercially minded occupational associations". As opposed to others, professional practitioners:

... must at all times place the responsibility for the welfare, health and safety of the community before their responsibility to the profession, to sectional or private interests, or to other members of the profession.

If the idea of a profession is to have any significance, then it must hinge on this notion that professionals make a bargain with society in which they promise conscientiously to serve the public interest - even if to do so may, at times, be at their own expense. In return, society allocates certain privileges. These might include one or more of the following:

• the right to engage in self regulation
• the exclusive right to perform particular functions
• special status

At all times it should be remembered that what society gives, it can take away. It only accords privileges on the condition that members of the profession work to improve the common good. Having said this, there should be no doubt that all citizens are served by the existence of independent professions that are free to interpret the common good as being something other than that which a government of the day decrees. Once again, it should be noted that a capacity for a profession to fulfil this role depends on the extent to which the broader community trusts its judgement and motives.

Deciding to take up the full and proper responsibilities of a professional career is akin to the old idea of finding a vocation. In most cases, the actual rewards on offer hardly seem to cancel out the sacrifice that is made when the narrower pursuit of self-interest (common in the market) is eschewed in favour of the public interest. Instead of relying on the operation of the ‘invisible hand’, the professional must choose - and choose well! The burden of choice is sometimes felt to be intolerable. This may explain why it is that one now hears members of the profession stressing that their primary orientation is towards 'running a business'

Perhaps the idea of 'vocation' has become foreign to most of those who make up the contemporary professions. Perhaps the belief in intrinsic goods has faded. But even if one is motivated by a spirit of public service, how is one to determine what may be in the public interest? One answer, from as far back as the ancient Greeks, is to try to identify certain core goods. Some of these immediately come to mind. For example, a good society is likely to be one in which people are treated with justice, in which good health is commonplace, in which the environment is rich, rewarding and safe.

The introduction to Ethics & the Legal Profession, edited by Michael Davis and Frederick Elliston(iii) builds on this idea:

One of the tasks of the professional is to seek the social good. It follows from this that one cannot be a professional unless one has some sense of what the social good is. Accordingly, one's very status as a professional requires that one possess this moral truth. But it requires more, for each profession seeks the social good in a different form, according to its particular expertise: doctors seek it in the form of health; engineers in the form of safe efficient buildings; and lawyers seek it in the form of justice. Each profession must seek its own form of the social good. Without such knowledge professionals cannot perform their social roles.

As noted above, an old idea is at work here. It suggests that professionals might need to develop a particular appreciation and understanding of some defining end, such as justice. It is as much for this and the disinterested pursuit of these ends that the community looks to the professions for assistance.

The anatomy of self-regulation

It was argued above that the list of privileges to be extended by society to professionals, as part of a social compact, might include the right to self-regulation. In focusing on this matter, it is important to note that the privilege to engage in self-regulation is unevenly distributed amongst the professions. Some professions enjoy the benefits (and responsibilities) of self-regulation as a statutory right. Others have much less of an opportunity to influence the conduct of their members. For example, one might contrast the licensing function of bodies such as the Law Society in New South Wales with the limited (if non-existent) role played by the equivalent body overseeing the practice of, say, architects.

Indeed, the two most common elements of self-regulation vary considerably in their application across the range of professional associations. These two elements are:

1. Regulation of the quality and competence of individuals admitted to the profession, and
2. Regulation of the conduct of members of the profession.

Some professions play no role in screening and certifying applicants, others play no role in disciplining the conduct of colleagues. And there are many shades in between.

1. Regulation of the quality and competence of individuals admitted to the profession

In relation to the first matter, it should be noted that there is considerable room for controversy when addressing the proposition that occupational groups have a hand in the selection and admission process. It's not just that there is a fear that the professions will use this power to control the market (and therefore the price) for their services, there is also a concern that the professions will come to be constituted by 'clones' of the dominant group. The risk is seen to be that minorities, or people who are "not like us", will be excluded from the benefits of professional association.

Although there has been (and may still be) a fair basis for the type of misgivings outlined above, it could be argued that the desire to hold the professions accountable for the actions of their members presupposes that they have had some say in determining who will be admitted to their ranks. If the privileges of all are to be undermined by the actions of a few, it is argued, then why not allow these few to be excluded? This may seem to be anti-competitive, but if the existence of the professions is to the overall good of society, then any reasonable action to preserve the professions, with their distinctive commitment to act in the spirit of public service, must also be for the overall good of society.

It is reasonably easy to see why the professions might claim the right to refuse admission to persons who lack the requisite knowledge, skills and understanding. But what about the right to exclude persons who are judged to lack the 'appropriate' character or temperament? Those who would allow for such an exclusion (a real possibility when applying for admission as a barrister or solicitor in NSW) argue that the proper conduct of the professions depends as much on the development and display of certain dispositions as it does on the exercise of particular skills.

It could be replied that the ability to screen people and bar them from the professions because of some judgement about character is to allow purely subjective decisions to stymie a person's career. Why not allow the impersonal and invisible hand of the market to decide? ‘good’ professionals will prosper while 'bad' professionals will fail. Let consumers decide! Such an argument is superficially attractive, however, it is open to challenge on two counts. Unless one is wedded to the notion of an extreme form of laissez-faire, in which all relations are reduced to transactions and in which the liberty to strike a bargain is maximised, then one will accept that free markets are always subject to some sort of regulation. Society regularly intervenes to control the range of goods made available on the open market. The licensing of professionals on the grounds of competence already restricts access, so why not limit access on the grounds of character?

The second objection is that the operation of market forces does nothing to ensure that unethical professional practice will be curtailed. The phenomenon of 'opinion shopping' demonstrates the way in which the market for professional services can be developed in a manner that ensures that, for the right price, the right opinion can be purchased.

So, it is at least arguable that responsible and accountable professions ought to be able to screen the admission of members and refuse entry to those who have defects of knowledge, skill or character. The problem is that screening people on the basis of perceived character flaws leads to restrictions based on assumptions about what a particular individual is likely to do. In many cases, such a restriction will be seen as unjust as the reliability of the prediction may be open to question. Similarly, a person's youthful mistakes (if that is what they were) may count against an application for membership of the professions - even if those mistakes were made without any knowledge of the likely consequences.

This is clearly a difficult area involving questions of justice, and in particular, questions about the way in which competing interests might be protected. In some circumstances the interests of the community will be best served if the professions restrict membership to those most likely to act in a spirit of public service. But in securing the interests of the community or the profession, the interests of the individual may be put at risk. It is because of the difficulty in balancing these interests that some look for an open admission policy supported by a rigorous process of professional self-discipline. And this leads to the second element of self-regulation outline above.

2. Regulation of the conduct of members of the profession.

The other leg of self-regulation is the capacity to evaluate the conduct of members and, where it is found to be wanting, apply sanctions. In most cases the ultimate sanction is the withdrawal of the right to practice.

Once again, there is tremendous variety in the extent to which this function is exercised by the various professions. In some cases, there is no licence to be revoked. In others, the power to investigate and try alleged offenders has been arrogated by the state. Given this, it will only be possible to discuss some of the general propositions relating to this aspect of self-regulation.

As a first observation, it should be noted that there is no inherent aspect of self-regulation that makes it any less effective than regulation by a third party in general or the state in particular. The fact that the law is so often breached ought to demonstrate that the state's power to regulate is frequently ineffective as a deterrent. Indeed, it seems that for regulation to be effective it is necessary that some generic features be present. These features include that:

• from the point of view of those to be regulated, there must be a perception that the requirements to be met are neither oppressive nor unjust,
• there is a reasonable chance that offences will be detected and successfully prosecuted by a credible authority, and
• the range of penalties for proven illicit behaviour are such that they will weigh in the mind of a person considering a proscribed course of action.

There is no reason, in principle, why the framework for self-regulation adopted by a profession should lack any of the features outlined above. Having said this, it should be realised that there is a general perception within the community that the professions cannot be trusted to manage self-regulation. What is more, many professionals feel that self-regulation lacks credibility and integrity. One doesn't have to look too far in order to discover some of the reasons for such perceptions. To the onlooker, it often seems that self-regulation only applies to those unfortunate enough not to belong to a large and powerful practice. There are many anecdotes telling of how large firms have snubbed their noses at the investigations being carried out by a professional association. In some circumstances the level of disdain even extends to a refusal to identify the partner responsible for a matter that is the subject of an investigation.

Although most of my examples are drawn from observations of that which occurs in New South Wales (and in a couple of professions in particular) it is enough to note that one of the strongest forces for undermining the case for self-regulation is the perception that the rules are unevenly applied.

More generally, there is a concern that the professions have a hopeless conflict of interest when regulating their own behaviour. The argument runs that because the professions are governed by elected persons and because of collegial solidarity and finally, because of a need to maintain a squeaky clean image, the professions are incapable of meeting the community's expectation that regulation be properly pursued.

Quite frankly, I think that there is a conflict of interest (or duty) to be mediated by professional associations. Community concerns are often justified by experience. However, occasional faults should not be allowed to obscure the point that the process of self-regulation can be made to operate with integrity and credibility. If minded to do so, the professions can adopt practices that would improve perceptions about their capacity to engage in self-regulation. Some professions are not free to control the shape or form of disciplinary proceedings, however, where possible the professions might:

• ensure that all persons are treated the same - irrespective of status or protection,
• ensure that there is lay representation on disciplinary committees,
• ensure that the range of sanctions to be applied represents an adequate response to proven offences,
• ensure that the process of self-regulation is transparent to the community's gaze.

The trouble is that none of these steps is likely to address the problem of the perceived conflict of interest. The only way to limit such an impression may be to move to a position of co-regulation. In such circumstances, a disinterested party (such as the state) can exercise joint authority over the regulatory process. Some professionals will regard such a move as an undesirable erosion of independence. I would certainly agree that such a state of affairs is far from ideal. Yet, it needs to be stressed again that professional independence is nothing more than a social artefact. Having squandered public trust, the professions may now need to accept co-regulation as the price to be paid for renewing the underlying social compact on which other privileges rest.

The positive dimension of self-regulation

Much of the above has concentrated on issues such as controlling admission to the professions and exercising a disciplinary function. As such, a somewhat 'negative' emphasis on the role of the professions may have emerged. This needs to be balanced with some comments about some of the positive aspects of self-regulation.

Whereas the disciplinary function reacts to cases of perceived wrong-doing, an important part of the professions' regulatory function lies in a capacity to adopt a proactive stance. The need to be able to maintain the standards of the professions should be expressed through programmes of education and formalised systems of professional peer support. It is easy enough to talk of the ideals of public service in a paper of this sort. It is far harder to put such ideals into practice - especially when some of one's professional peers are prepared to sacrifice their ethics if only the price is right. Part of the response to this challenge lies in the disciplinary processes of the profession. But the other part must lie in educating members of the professions so that they come to see that unethical behaviour is not only unprofitable (in the long term) but also wrong. In practice, this may lead to a careful re-examination of that which is rewarded by wealth, status and peer group honour. Where the level of competence is equivalent, will it be the slick operator who dodges the ethical considerations who receives the plaudits, or will the person of discernment and moral courage be recognised?

Whether it be through exemplary behaviour, codes of ethics, the use of mentors, expanded professional education or any one of a host of other means, the end must be to create a climate of expectation such that the 'guns for hire' have no room to move.

This is to go well beyond what is normally required of a trade association or guild. But is this not the crucial point? The professions hold a place in society that is very different to that occupied by other associations which are constituted in order to foster commercial dealings.

This leads me to some concluding remarks. The idea of self-regulation of the professions does seem to be a little curious when pitted against the notion of competition policy. There can be little doubt that those who propose extending the rules of competition to the professions do so because they believe that such an extension is in the public interest. The trouble is that there appear to be competing notions of the public interest at work.

Society vs the 'enterprise association'

In the current social environment there are many who would argue that a genuine commitment to ethics is an unrealisable ideal. Many think that sound ethical principles are fine in theory but that they can't really be applied in practice. To try to do so is to be nostalgic. They say that to promote virtue is to be old fashioned, to hark back to ideas only useful in a different era. They ask us to be 'realistic' and to embrace the 'modern' way of doing things. This plea is often nothing more than an ill disguised plea to allow for the survival of the fittest. Perhaps such people are right. Perhaps a dog-eat-dog world will be the most efficient. And perhaps efficiency is the only value that we need to embrace in the search for a worthwhile life. Or perhaps efficiency is only one of a number of important values that we must learn to juggle across an unpredictable landscape.

Those of us who are serious about the need to make ethical considerations an explicit concern in our daily lives must face up to this challenge. After all, what if our critics in the market place are right? What if the prime (and exclusive) aim in life really is to maximise our satisfaction of wants (and not just needs)? What if the liberty of the individual (important as it is) transcends all other considerations? What if it is through competition alone that we find the ultimate expression of our humanity?

One can only reply that an authentic commitment to leading an ethical life may require us to live in a way that makes only partial sense in a world dominated by an orientation to the principles of laissez faire. In a recent article re-published in the Centre's quarterly letter City Ethics, Hugh Mackay(iv) argues that a commitment to ethics may only make full sense when viewed against a background of community. That is, the possibility of leading an ethical life probably depends on the prior existence of a society and not just an enterprise association.

Most people have a fairly good feel for what it means to live in a ‘society’. But what about an ‘enterprise association’? John Casey(v) has tried to describe the latter:

We might imagine a city founded purely as a trading post. The laws of the city will reflect its original purpose, and have to be understood in relation to this purpose. Contracts will be vigorously enforced however unreasonable or unjust, because it is of the highest importance to retain the confidence of those with whom the city trades. Indeed, the notion of a contract being 'unjust' will have no meaning. All education will be subordinated to the need to produce an ‘enterprise culture’, and no subject will be studied as an end in itself. The rulers of the city will regard themselves essentially as the managers of the enterprise. Their tasks will be to maximise wealth and promote trade.

Is this so very far away from what we now experience? Some may say that this is an accurate and even attractive picture of the type of world in which we live. But does such a view of our relationships miss something of vital importance? For example, do we exist simply to "facilitate the exchange of commodities" or is there something more? Is there, for example, a need to value friendships, to realise that other people can make a claim on us? Is living in a society only possible when we recognise that each person is bound to others within a network of formal and informal relationships?

Conclusion

This is a challenge for the professions. After all, the professions draw attention to their special ethical obligations as a way of distinguishing themselves from other occupational groups. But beyond this, the professions need to demonstrate why it is that their privileged position has relevance to contemporary society. Why should self-regulation be allowed when the rest of us are subject to the normal application of the law?

In answer it should be remembered that self-regulation is not just a privilege - it is also a burden. Properly administered the duty to self-regulate creates additional obligations that must be met by the professional. So given all of this, why might it be desirable for self-regulation by the professions to continue?

I would like to suggest that there are at least two reasons for thinking carefully before reducing the incidence of self-regulation. The first of these has already been noted and refers to the link between the community's reasonable expectation that the professions be accountable, on one hand, and the requirement that the professions have some control over the action of members on the other. The second reason relates to the perception that people are less likely to break rules that they have had a hand in making than those that are imposed from afar. Given that ethics is ultimately about relationships, it may be that the collegial nature of the professions allows for an improved acceptance of the broad ethical dimension of professional practice.

As an aside, there is a need for the professions to adopt a broader view of the nature of ethics. It is unfortunate to note that many practitioners think of ethics as being about nothing more than the special rules of conduct imposed by the profession. Thus, there is a frequent confusion between codes of conduct, rules of professional etiquette and codes of ethics. The problem stems from the fact that many professionals have lost sight of the founding question in ethics, “What ought one to do?”.

The professions, and the community that warrants their continued existence, face the challenge of making a choice about the kind of society to be preferred Do we desire a community of citizens in which something like the professions make sense? Or do we want the enterprise association in which each of us is little more than a purveyor or consumer of commodities? The latter consigns us to a place where the active pursuit of public service will seem strange and alien - just a shadow of a once remembered past.

This paper contains excerpts from an article submitted for publication to The Australian Law Journal. As such copyright to the relevant material is vested in the Law Book Company Ltd. © Law Book Company Ltd