The Competition and Markets Authority (CMA) is to examine ‘long-standing concerns about the affordability of legal services and standards of service’, it announced today.
A market study restricted to England and Wales will examine:
- Whether clients can drive effective competition by making informed purchasing decisions;
- Whether clients are adequately protected from potential harm or can obtain satisfactory redress if legal services go wrong;
- How regulation and the regulatory framework impact on competition for the supply of legal services.
The probe will not extend to criminal legal services, 'due to differences in the provision of such services – for example legal advice and representation are guaranteed for defendants in criminal proceedings'.
Rachel Merelie, senior director of delivery and sector regulation at the cartel watchdog, said: ‘We would be concerned if customers are not getting a good deal, either because they do not know what to expect when purchasing a legal service, or because they are not seeking appropriate legal support in the first place.
‘As well as carrying out our own research, we want to hear from all those involved about the issues they experience in using legal services and, in due course, how to tackle any problems we might identify.’
The CMA, based at Victoria House (pictured), London, said that recent surveys showed one in 10 users of legal services in England and Wales reported the overall service and advice provided was poor value for money. Just 13% said they viewed lawyers as cost-effective.
The watchdog will decide within six months whether it intends to refer the market for a more in-depth investigation, and a report must be published within 12 months setting out findings and actions it proposes to take.
As well as analysing existing research and gathering evidence from interested parties, the CMA will carry out surveys of consumers and small businesses and also plans to conduct a number of case studies into specific legal service areas.
The government has already announced its own consultation by spring 2016 on removing barriers to entry for alternative business models in legal services, and on making legal service regulators independent from their representative bodies.
In 2001, a review by the Office of Fair Trading, the CMA’s predecessor, found that many of the rules of the legal professions were ‘unduly restrictive, resulting in consumers receiving poorer value for money than they would have done under more competitive conditions’.
It recommended that rules governing the legal profession should be fully subject to competition law and that unjustified restrictions on competition should be removed.
That finding led to the Clementi review – and the Legal Services Act, which underpins the current regulatory structure.
Even though the CMA's remit extends to Scotland and Northern Ireland, the new investigation will be restricted to England and Wales, 'recognising that Scotland and Northern Ireland have different legal systems, and that regulatory reform is at a different stage in these jurisdictions'.
However, the watchdog said the outcome 'could inform any future consideration of similar issues in these countries'.
The Solicitors Regulation Authority welcomed today's announcement. Paul Philip, chief executive, said: ‘Over the past two years, our programme of regulatory reform has prioritised opening up the market and encouraging growth and innovation. We believe that will benefit both the public and the profession.
‘The government's proposals to make legal service regulators independent from their representative bodies would also strengthen the market and help make regulation more efficient and effective. Making this change would also cut costs, which will benefit solicitors and law firms and their clients, as well as boosting public confidence.’
Neil Buckley, chief executive of the Legal Services Board said the study ‘offers a clear opportunity to assess where the legal services market stands today. It offers an opening to understand better what should be done to unlock growth, increase productivity and address the significant unmet need that exits in this particularly important segment of the UK’s economy.’
He said that the CMA’s decision reflects long-standing concerns about both the affordability and quality of legal services.
‘A major problem in legal services is that a large proportion of the population and small businesses cannot afford such critical services. The functioning of the legal services market has without doubt improved since the introduction of the Legal Services Act but it still has a long way to go before it can be said that it is an effective market.’
Law Society chief executive Catherine Dixon commented: ‘We know that the market for legal services is not fair as solicitors, who are heavily regulated, are having to compete with unregulated providers. Regulation is there to protect the public and we believe that for the market to work effectively regulation has to be applied equally to all providers.
‘This review is a good opportunity to reduce the regulatory burden on those solicitors who are having to compete with unregulated providers. Moving away from overly burdensome regulation, that does not service the public or meet business need, by placing greater reliance on solicitors taking responsibility for and driving their own professional standards is key. There is also an opportunity to ensure that the public and businesses are informed that if they do purchase from an unregulated provider they will get less protection.
‘Solicitors are trained, qualified, regulated, required to carry insurance and have professional standards. We will be contributing the views of solicitors, our research, our recent report on affordable legal services and our imminent Future of Legal Services report to inform the study.
‘Legal services provide a significant contribution to the UK economy. It is fundamental that competition across the provision of all legal services is fair if market confidence is to be maintained.’