Ethical and fiduciary duties v's competition laws

Ethical obligations

One matter that has been put to the Commission as a reason that competition laws should not be imposed upon professionals is the ethical obligations owed by professionals in their relationship to their clients/patients. As with fiduciary duties, the Commission’s response to this is that there is nothing inherent in their ethical duties that should prevent the Competition and Consumer Act applying to professionals.

Dr Damian Grace defines ethics as 'a way of living one’s life in pursuit of excellence. Ethics is not just a private matter. It has its public and private sides—but it cannot be just personal.' Also, 'ethics is not mere conformity to rules.' Acting in a way which breaches the law of the land can certainly not be taken to be done in the name of ethics.

Professionals have an ethical obligation to act in the best interest of their client/patient. Ethical duties also prohibit professionals from acting to promote their own self interest. These duties do not excuse professionals from having to abide by competition laws.

Fiduciary duties

A constant criticism heard by the Commission in recent times has been that competition laws should not apply to the professions because professionals have a fiduciary relationship with their clients and fiduciary duties to fulfil which distinguish them from other businesses. The unstated assumption is that such relationships or duties to clients are incompatible with any obligation to abide by the competition laws.

Is the relationship between a professional and client a fiduciary one?

In Australia there are certain relationships that the law recognises as fiduciary relationships. These are relationships of trustee and beneficiary, agent and principal, solicitor and client, employee and employer, director and company, and partners. However, it cannot properly be said that a relationship between any professional and his or her client is a ‘fiduciary relationship’. As was pointed out by Dawson and Toohey JJ in the High Court of Australia case of Breen v Williams:

'… The law has not, as yet been able to formulate any precise or comprehensive definition of the circumstances in which a person is constituted a fiduciary in his or her relations with another.'

Even where there is a fiduciary relationship between a professional and a client (for example, as between a solicitor and his or her client) it is important to acknowledge and bear in mind that the fiduciary obligations do not extend over the entire relationship. As Chief Justice Brennan pointed out in Breen v Williams:

It is erroneous to regard the duty owed by a fiduciary to his beneficiary as attaching to every aspect of the fiduciary’s conduct, however irrelevant that conduct may be to the agency or relationship that is the source of fiduciary duty.

Fiduciary obligations—incompatible with competition laws?

Even where there are fiduciary relationships, the following questions arise.

What is it about the fiduciary relationship between a professional and his or her client that requires the professional to engage in price fixing with his or her competitors? Or to engage in a misuse of market power? Or to engage in exclusive dealing, resale price maintenance or other conduct prohibited by competition laws?

The Commission’s response to those questions is ‘probably nothing’. But in the Australian context there is also a further response if there is something that is anti-competitive and it really is for the client's benefit. Professionals may utilise the authorisation process so that conduct can continue with immunity from court action. If professionals can demonstrate that the public benefit of that conduct outweighs its anti-competitive detriment they can obtain immunity from court action for that conduct by way of Commission authorisation.

Finally on this issue, it is also worth noting that the relationship between a company director and the company is also a recognised fiduciary relationship. However, there is no suggestion of providing company directors with an exemption or immunity from the competition laws where their conduct can readily be described as imposing a direct liability on the company and an accessorial liability on themselves for exactly the same conduct.