Rocky road round restrictions

COMPETITION IN PROFESSIONS: one year on, the OFT examines how lawyers have reacted to its initial report

A summary of the Office of Fair Trading's (OFT) view on how the legal professions and government have approached the rules identified in last year's report as being potentially restrictive of competition.

LAW SOCIETY RULES:

Ban on multi-disciplinary practices (MDPs)The Law Society Council will be asked to reconsider its March vote to reject abolition of the fee-sharing ban.

In addition, primary legislation may be needed to allow the Society to regulate non-solicitors, as envisaged by its MDP plan.

This is a matter for the Lord Chancellor's Department (LCD).

Ban on employed solicitors acting for third partiesThe Law Society Council has approved removal of this, so long as it is possible to extend to third-party clients of employed solicitors the same protections available to clients of private practice solicitors.

Ban on comparative advertising of feesAbolished.

Ban on seeking business by telephoneAbolished in relation to businesses.

The OFT has accepted the Society's argument that cold-calling individuals, especially within the personal injury field, may be detrimental to the public.

Ban on payments for referralsThis too was retained in the March vote, although is also likely to return for reconsideration.

'The restriction hampers the development of new forms of marketing that could bring clients and professionals together,' the OFT said.

'We look to the Law Society to take prompt action to lift the restriction.'

Fee guidance for non-contentious work such as probate and conveyancingThe Society has indicated that it is willing to withdraw the fee guidance.

'We look to the Law Society to take prompt action to lift the restriction.'In conclusion, the OFT said that although only some restrictions have been dealt with, 'we consider that for the time being, the most effective way to achieve the aims in the report is to encourage the Law Society to proceed with its programme of reform and to review progress regularly to ensure that the Law Society is proceeding in a timely and appropriate manner.

So long as self-deregulation is proceeding effectively, public action is not immediately necessary.'

BAR COUNCIL RULES:

Ban on comparative advertising of feesAbolished.

Restriction on direct accessThe bar last week launched a consultation on measured reform of this (see [2002] Gazette, 7 February, 1), with a view to implementation on 1 January 2003.

The OFT welcomed this so long as there are 'no unnecessary limitations on the freedom of barristers to accept instructions directly from clients, and the freedom of clients to engage the services of a barrister without the intervention of a solicitor'.

Ban on comparative advertising of success ratesThe OFT accepted the bar's argument that this should be retained as it is impossible and arguably dangerous to relate success and failure to winning and losing cases.

Withholding the right to conduct litigationThe OFT was not persuaded by the bar that this should remain, saying: 'We intend to pursue this further.'It rejected the bar's arguments, such as that a dual profession allows barristers to specialise in advocacy and advice to clients' benefit.

The OFT said it had no objection to specialisation, but it did to a blanket rule that imposes specialisation by restricting what barristers can do.On the contention that clients benefit from the knowledge of solicitors when choosing barristers, it said: 'The maintenance of a dual profession in which the client must pay for the services of both a solicitor and a barrister is unlikely to be the most efficient way of addressing the issue of informed choice.' It dismissed the argument about the difficulty and the cost associated with regulation as 'essentially a practical problem rather than one of principle'.

Ban on barristers forming partnerships with other barristers or MDPsThe OFT was unconvinced by the bar's reasons for retaining this, although pledged only 'to give further detailed consideration' to it.Among other things, the bar said the ban actually promotes competition and choice.

The OFT questioned the idea that partnerships would lead to inadequate choice as a general proposition, but noted that there may be some niche areas with few practitioners.

It said barristers should have the choice of how to practise.

GOVERNMENT ACTION:

Repeal Competition Act 1998, schedule 4This excludes professional rules from the scope of the Act, and its abolition is proposed in the Enterprise Bill, published in March.

QC systemGovernmental involvement in distinguishing between junior barristers and QCs has no parallel in other markets, the OFT said, also questioning the operation of the system as a quality mark in the light of the way it is awarded.

'Moreover, we remain concerned that the QC system may operate to distort competition.

One sign of this is the step-change in fees that QCs are said to command upon taking silk.'The OFT also noted suggestions that there is a QC quota each year.

'In this regard, we note with interest that the number of QCs appointed in 2002 is markedly higher than in any other recent year.'

Legal professional privilegeThe OFT said: 'We recognise that there are fundamental arguments for protecting exchanges between lawyers and clients.

However, where lawyers are in competition with non-lawyers (eg, in tax work), legal professional privilege may distort competition in favour of the lawyer.'

Extension of rights to provide conveyancing servicesFuller implementation of the authorised conveyancing practitioner scheme contained in the Courts and Legal Services Act 1990 'would allow banks and building societies to provide conveyancing services'.

Extension of rights to provide probate servicesFurther implementation of sections 54 and 55 of the 1990 Act 'would be likely to increase competition in the market for probate services'.

However, the OFT said these issues - as well as MDPs - are for the LCD to address: 'The LCD recently announced its intention to consult on these matters before the summer recess.'

LINKS: www.oft.gov.uk