Requiring law firms to publish information on prices has so far made little impression on competition and outcomes, the competition watchdog admitted today. In an assessment of progress since its 2016 market study, which found the legal services sector was not working well for 'consumers', the Competition and Markets Authority reports today that more work needs to be done on transparency. It also calls for reform of the Legal Services Act, saying the case is 'compelling'.
On transparency, the review finds 'clear signs of progress', saying that many more firms provide information to help clients shop around. 'However, while the evidence suggests that some customers are taking advantage of the changes, there is still work to do as there only appears to have been a limited impact on the intensity of competition between providers and on sector outcomes.'
The CMA now recommends that the Legal Services Board (LSB), working with other regulators, continues to build on the reforms and tackle some of the 2016 recommendations that 'still require progression', such as providing more information on quality.
On regulatory reform, the review notes that the government has not acted on its call for a regulatory review of the Legal Services Act 2007. 'The CMA considers that the case for reform remains pressing, particularly as there are signs of growth in the unregulated sector, and therefore remains of the view that wholesale reform of the act is necessary.'
In the absence of a government to commitment to reform, the CMA suggests shorter term steps to achieve reform in stages. It proposes that:
- The Ministry of Justice establish a mandatory public register of unregulated providers, requiring them to provide appropriate redress;
- The LSB review reserved activities 'to ensure that such restrictions are necessary and proportionate'.
Andrea Coscelli, the CMA’s chief executive said: 'It is positive to see changes that have already been made, but more progress is needed. We encourage the Ministry of Justice, the Legal Services Board and other legal services regulators to continue to work towards reform and to make sure the sector works well for consumers long into the future.'
The Law Society said the review showed that the solicitor profession has made great advances in transparency but risk of consumer harm continues in the unregulated sector.
'We’ve had very constructive engagement with the CMA during this review, they have clearly listened to us and recognise the progress made by law firms,' Law Society president David Greene said. He added that any further reforms 'should not only focus on competition outcomes, but also on the public interest, the rule of law, access to justice, and an independent, strong, diverse and effective legal profession – all of which are regulatory objectives under the Legal Services Act'.
While competition may drive down costs, Greene said 'there are few winners in a race to the bottom where low cost may be offset by consumer harm'.
'A review of the unregulated sector could identify high risk areas and specific harms to inform the development of workable and effective regulatory interventions. The current legal regulatory framework is sufficiently flexible for improvements to be made where there is evidence of consumer harm, including through regulation,' he said.