Risk Reading — Consulting Conflicts Considered, IP Market Expansion Raises Conflicts and Commercial Concerns

“An Australian company now owns one-third of Canada’s patent law market, drawing concern over conflicts of interest” —

• “Australian intellectual property services company IPH Ltd. now controls about a third of the Canadian patent and trademark law market following its recent acquisition of Bereskin & Parr.”
• “That deal, which was announced in late August, is IPH’s fourth Canadian acquisition in the past two years. The company’s aggressive push into Canada has raised concerns in some quarters about the impact on the country’s intellectual property market. Some in the sector have warned that this level of consolidation will drive up costs and create conflict of interest headaches, while others warn that the IPH business model is going to harm small domestic innovators.”
• “In 2013, a law changed in Australia allowing patent attorney firms to incorporate. This was the genesis of IPH, which grew out of Australian intellectual property firm Spruson & Ferguson. The partners sold the business into IPH and then listed the company on the Australian Stock Exchange.”
• “The way the ownership is structured in Canada is as follows: IPH purchases the firm’s intellectual property agency practice – the component that handles patent prosecution and trademark work – and then assumes an ownership stake in the legal practice through the agency.”
• “IPH’s entrance into the Canadian market has some lawyers worried. Among them is Louis-Pierre Gravelle, who left Bereskin & Parr recently after the buyout was announced. He is now with Dipchand LLP. ‘The incursion of IPH on the Canadian market will have long lasting ripple effect, some of which is predictable, some of which isn’t,’ Mr. Gravelle said.”
• “Gunars Gaikis, a senior counsel at Norton Rose Fulbright Canada, who left Smart & Biggar after nearly four decades shortly after the sale to IPH, raised a similar concern. ‘Their focus is profit,’ he said. ‘Not everything is always about money … I know in my own career, somebody calls, they have an idea, you help them out, you quickly realize they really can’t afford very much, but you help them to the extent you can. I think a lot of that is likely to go by the wayside.’”

“What France’s ‘McKinsey Gate’ scandal revealed about the four major types of consulting’s conflicts of interests“–

• “McKinsey & Company and other consulting firms have long faced criticisms for their involvement with governments. Investigative journalists and academics alike have flagged their growing influence, citing cases like the staggering expenses of up to £1 million per day on private consultants for the UK’s Covid-19 Test-and-Trace service, or the €10.7 million in contracts paid to McKinsey by the French government during the same crisis.”
• “Yet there is broader criticism that consulting firms have lost their professional ethos. Investigative journalist Duff McDonald, in his 2014 book The Firm, argued that McKinsey veered far from the ethical standards set by its founder, Marvin Bower, in the 1950s, who invented management consulting by taking inspiration from the law profession.”
• “This shift has led to a long series of scandals involving corruption, unethical work, and conflicts of interest. Other consulting firms, including Bain & Company and BCG, have also faced their fair share of scandals. In 2022, they were banned from bidding on South African government contracts for their role in a state capture scandal, and BCG recently agreed to forfeit $14 million in profits in Angola after admitting to bribery scandal.”
• “A closer look at recent scandals that strategy consulting firms have faced in advising governments reveals four types of conflicts of interest:
  • Personal interests and relationships: As the Cash Investigation episode revealed, Karim Tadjeddine’s connections with Macron’s party allowed McKinsey to establish a strong foothold within government decision-making. This not only advanced Tadjeddine’s career but also underscored a deeper conflict – where consultants build relationships or align themselves with key networks to secure future contracts, bonuses, or other rewards. One common avenue for such conflicts is their pro bono work, which Cash Investigation exposed as a tool that Tadjeddine used to forge connections that later led to profitable contracts.
  • Working with conflicting clients and assignments: McKinsey & Company’s involvement in the opioid crisis is a striking example. The firm provided strategic advice both to opioid manufacturers like Purdue Pharma and to the US Food and Drug Administration (FDA), which regulates the opioid market. An investigation by the US House of Representatives revealed that McKinsey failed to disclose these conflicts over a 10-year period, impacting 37 FDA contracts at a cost of over $65 million. Although Cash Investigation did not address such overlapping contracts, similar conflicts likely exist in France, where McKinsey’s work with both public and private clients raises red flags. According to the French Senate, those advising the government are legally required to declare potential conflicts of interest, yet in most cases McKinsey failed to submit these declarations.
  • Profit-centered advice: In a highly publicised case, the South African Government Commission found that Bain & Company acted unlawfully colluding with private companies to manipulate government procedures and shape policies in their favour. This highlights a crucial issue overlooked by Cash Investigation: private consultants often pursue financial interests that conflict with the government’s responsibility to serve the public good. When such firms work for governments, these their profit motive can undermine social welfare goals.
  • Revolving doors: Another conflict of interest involves leveraging personal connections within government to influence decisions. Largely overlooked by the documentary, this issue is significant: around 1% of McKinsey’s employees in France previously held high-ranking positions in the government, and several have transitioned into government roles. In an industry where networks create opportunities, this revolving door between consulting firms and government raises serious concerns about impartiality. A notable example outside France is Deloitte’s role in the UK’s Covid-19 Test and Trace program, as detailed in ‘The Big Con’. Deloitte’s close ties to government officials, including Cabinet Office minister Chloe Smith – who previously worked for Deloitte – likely fast-tracked the firm’s £279.5 million contract during the pandemic.”