The Law Society has cautioned the competition watchdog against recommending regulatory changes to force firms to reveal more information about their prices and quality of service.
In a 40-page response to the Competition and Markets Authority’s (CMA’s) interim report on the legal services market, Chancery Lane says it supports the objective of ensuring useful information is provided for consumers – but ‘we believe that market-driven solutions can and will plug the transparency of information gap’.
The CMA last month announced that competition in the legal services market did not merit a formal investigation, saying that it would instead focus on ways of improving the information available to consumers before they buy.
In its response, the Society agrees with the CMA that sections of the population do not have access to legal services. However it lays the blame on government cuts of funding for a significant number of legal services and low levels of legal literacy rather than a lack of competition.
Overall, it urges caution when reaching conclusions about any perceived market failure.
‘Remedies should only be put in place where there is clear evidence of harm, restricted to that part of the market where the harm resides and even then, only when the full consequences of those remedies in all of the markets affected have been fully understood and evaluated.’
Noting that the current regulatory regime is less than 10 years old, it warns that further disruptive reforms of the legal services markets could have a chilling effect, harming the economy as a whole.
‘The threshold for triggering any change within the sector should be high, based on clear and strong evidence of significant harm or inefficiencies, alongside a clear understanding of the gains to be achieved,’ the response states.
The Society is also ‘disappointed’ that the CMA has decided not to recommend that the title ‘lawyer’ be legally protected. ‘We strongly believe that this is in the public interest, and that the concept should not be dismissed without fuller policy and economic analysis.’
On the oversight of unregulated providers, the Society disagrees with the CMA’s conclusion that the different level of client protection is not significant.
‘We recognise that the role of these providers in the legal services markets is still emerging, the number of consumers exposed is relatively low and there is a lack of insight about consumer experiences and we understand that this may not currently meet a “significant detriment” threshold at this point in time.
‘[However] a lack of evidence does not mean that there is no issue for consumers, nor that in the future there will be no issue, and the CMA should look to proactively address this before it becomes a large-scale problem.’
The response concludes by saying that the CMA ‘has not provided a theory of harm supported by evidence of actual material harm to consumers, the legal services sector or the economy.
‘In the absence of evidence, we do not believe that a case has been made for revisiting the design of the regime so soon after the last root and branch review undertaken by the Clementi review.’