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CMA: Lawyers must be more transparent on quality and costs

Law Society ‘astonished’ by watchdog’s report as SRA renews call for independent regulation

15 December 2016

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Lawyers must be more transparent over the cost and quality of service they provide to ensure consumers get value for money, the Competition and Markets Authority has concluded in its long-awaited final report on the legal services market.

The competition watchdog said legal services for individual consumers and small businesses were not working well amid a disparity of cost for similar services in addition to a lack of information on price, quality, and service.

The CMA also found that while the current regulatory framework is not a major barrier to competition, it may not be sustainable in the long term. In particular, the CMA said the framework is not sufficiently flexible to apply proportionate risk-based regulation which reflects differences across legal services and could harm competition.

The watchdog recommended that the Ministry of Justice reviews the current framework to make it more flexible and targeted at protecting consumers in areas where it is most needed.

To improve the current situation the CMA set out a package of measures to be overseen by the Legal Services Board to help consumers choose the best option.

Firms should provide a requirement for providers to display information on price, service, redress, and regulatory status to help potential customers. This would include publishing pricing information for online, along with a revamp of the Legal Choices website.

Further, facilitating the development of comparison sites and other intermediaries was called for to allow customers to compare providers in one place by making data already collected by regulators available.

Legal service providers will also be encouraged to engage with feedback and review platforms to ensure customers can benefit from the experience of others before making their choice.

The CMA also recommended that the MoJ look into the possibility of extending the protection from existing redress schemes to customers using ‘unauthorised’ providers.

The CMA’s year-long study into the legal services market began in January and its latest findings expanded on its summer interim report. It pledged to re-evaluate progress and the impact of the recommendations in three years’ time and intervene further if progress did not prove satisfactory.

Responding to the report, LSB chairman Sir Michael Pitt said the recommendations would be a catalyst that would galvanise ‘a step-change in the legal services sector’s competitiveness’.

‘The dual focus on market transparency and structural reform is essential,’ he said. ‘In particular we are pleased that there are recommendations to the Ministry of Justice for action on regulatory independence and the need for wider reform of the Legal Services Act. These are central elements of our own vision for the future of legal services regulation, as we set out earlier this year.’

Paul Philip, chief executive of the Solicitors Regulation Authority, said the report makes ‘a good case for regulation that is independent of both representation and government’ and echoed the SRA’s view that independent regulation was key for public trust and confidence in the sector.

However, the president of the Law Society, Robert Bourns, did not agree and said he was ‘astonished’ at the CMA appearing to prioritise deregulation over consumer protection.

‘If solicitors were to offer legal services from unregulated companies as suggested by the CMA, then their clients would no longer enjoy a raft of protections – from confidentiality to compensation – offered by every solicitor in a solicitor firm,’ he remarked. ‘These deregulatory changes would undermine consumer protections and erode trust in the legal system.’

As to whether a review of the current regulatory framework is needed, Bourns said: ‘As the UK faces one of the biggest constitutional challenges in living memory, uncertainty for business should be reduced, not increased. For this reason we believe it would be unwise to review regulation of the legal sector at this time, nor is there demand from consumers or the profession for such reforms.’

Customer journey

Also commenting on the report, the chair of the Council for Licensed Conveyancers, Dame Janet Paraskeva, welcomed the need for a more rational, risk-based approach to regulation.

‘The CMA recommends the MoJ undertake a review of independence, but this is unnecessary in our view. The LSB has powers to secure independent regulation. Its chair has publicly acknowledged the case for action, as the CMA now does,’ she said.

‘With the government under a great deal of pressure on other fronts, we urge the LSB to take action now to establish regulation independent of representation and so continue the process of reform to fulfil the purpose of the Legal Services Act. To do so would be a profound and fundamental step that would increase public and consumer confidence in the legal professions.’

Sam Younger CBE, chairman of CILEx Regulation, added: ‘The CMA recommendations offer us an opportunity to consider the different stages of the customer journey and how we as regulators can encourage improvements to the level of information that is made available to them. We would not envisage taking a prescriptive approach, but will consider whether our current standards empower providers to deliver services with sufficient transparency.’

Matthew Rogers is a reporter at Solicitors Journal

matthew.rogers@solicitorsjournal.co.uk | @lex_progress

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