The Law Society has welcomed a decision by the Competition and Markets Authority not to launch a formal investigation into the legal services market.
But Chancery Lane contested the watchdog’s headline conclusion that competition is undermined by lack of transparency on pricing and service quality, after the CMA said it will now focus on boosting the information available to consumers before they buy.
The CMA’s report concludes that despite the proliferation of fixed fees in commoditised services, competition is not working as well as it might for the public and small businesses. Only 17% of legal service providers publish prices online and digital comparison tools are lacking.
Only one in five consumers compares providers before buying, the CMA found - they rely instead on recommendations from family or friends without checking the market.
However, the Society pointed to research co-commissioned with super-regulator the Legal Services Board showing that solicitors are already more likely than other advisers to provide information on costs and how long work will take. The same research found that four out five of those who sought professional advice were satisfied with the outcome of their problem.
Catherine Dixon, the Society’s chief executive, said: ’We believe that the market for legal services is already competitive and solicitors offer exceptional services to their clients as a consequence of rigorous training and years of experience.’
Dixon stressed that the Society provides a free ‘find a solicitor’ online service and pledged to work with the watchdog to provide guidance and support to solicitors on best practice and service transparency.
Today’s interim report by the CMA concludes an investigation commenced six months ago to examine ‘long-standing concerns about the affordability of legal services and standards of service’.
Restricted to England and Wales the study - which excluded criminal - examined whether clients: can drive competition by making informed purchasing decisions; and are adequately protected from potential harm or can obtain satisfactory redress if things go wrong.
It ran in tandem with a Ministry of Justice consultation on removing barriers to competition which culminated in yesterday’s proposals to further ease restrictions on entry into the market by alternative providers.
Confirming that the CMA will not launch a full market investigation, the authority’s senior director for the legal services market study, Rachel Merelie, said: ’Our focus now will be on how we can drive competition by improving the information that providers make available to consumers both before they buy – in order to help them shop around – and during the process so that they aren’t hit with unexpected costs.
'We will also look at measures to improve the existing independent information channels that are available for customers.’
The CMA probe also examined the impact of regulation. It found ‘no clear evidence’ that the current framework comprising nine frontline regulators impedes competition, while observing that reducing their number ‘has the potential’ to reduce costs and improve regulatory independence.
The report adds that the regime’s ‘emphasis on regulatory titles may contribute indirectly to lack of consumer awareness of legal service providers other than solicitors’. Most consumers wrongly assume that all providers are regulated, it also found.
Launching the MoJ’s report on barriers to competition yesterday, justice minister Lord Faulks said the CMA’s report will inform the ‘detail and timing’ of a further consultation on regulatory independence that could formally separate representative bodies from frontline regulators.
The report tentatively concludes that the CMA is ’open to the possibility that moving to an alternative regulatory model may generate long-term benefits to competition’.
Responding, the Society stressed that it is ’imperative’ the regulatory framework protects clients and the public interest. Chancery Lane reiterated the view expressed last week by Dixon to the Commons justice select committee that the Brexit environment ’is not the time’ for a root-and-branch overhaul.
The regime imposed by the 2007 Legal Services Act ’seems to be working effectively and importantly regulation is operationally independent’, Dixon said today. She stressed nevertheless the Society’s agreement that ’simpler and better regulation which focuses on applying consistent regulatory rules to protect buyers of legal services across the market is desirable’.
Dixon added: ’We think the current definition of regulation is way too broad because it includes professional standards, legal education and training plus entry into the profession, regulatory rules, engagement and awarding the professional title of solicitor. The current role of the regulator is beyond what is necessary to protect clients, creating bureaucracy and unnecessary cost. As envisaged by Sir David Clementi, professional standards should be owned and driven by the profession.
’It is clear that the CMA does not think regulation should be linked to professional title – and we agree. This would address the point that solicitors are regulated for everything they do and are competing against unregulated providers which is causing public confusion.
’We will work with the CMA to support solicitors to provide ever more relevant information to their clients, this will help clients to make informed decisions about the legal services they buy.’
Paul Philip, chief executive of the Solicitors Regulation Authority, said: ’The CMA has rightly focused on the changes that will make the biggest difference to the public. Too many people and small businesses are not using legal services.
'We agree that the best way to address this unmet need is through significantly improving information for the public and driving an open, healthy competitive legal market that provides affordable services. Our own reform programme is focused on these objectives, but we know there is more to do. We will be looking at the detail of the report and considering next steps.
’I am pleased that as a key principle the CMA has said that regulation should be fully independent from the providers of legal services. Modern, independent regulation is what the public expect. It supports the development of a competitive legal market and can only increase confidence in both legal services and those who provide them.’
Chairman of the bar Chantal-Aimée Doerries echoed the Law Society in arguing that the post-2007 regulatory regime is working effectively. She said: 'We agree with the CMA’s conclusion that wholesale change to the regulatory framework carries risks, for reasons of cost and uncertainty.
'From the bar’s perspective there is no evidence that the current arrangements for regulation are not working in the way that parliament intended when it enacted the Legal Services Act in 2007, through the separation of regulatory from representative functions. The bar’s ringfenced regulator, the Bar Standards Board, is fully independent of the Bar Council.'
She added: 'A single regulator, or consolidation of regulators, could not only result in the loss of expertise, as the CMA recognises, but could also lead to higher costs being imposed on lower risk providers like the bar. This would not be in the public interest.'