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Law Society sued by training provider over ‘anti-competitive’ CQS rule

Mr Justice Roth labels defendant's lawyers' costs as 'disproportionate' at latest case management conference

27 June 2016

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The Law Society is being sued by a legal training provider for requiring conveyancing firms to complete its anti-money laundering training to maintain Conveyancing Quality Scheme (CQS) accreditation.

Socrates Training Limited, which offers law firms anti-money laundering (AML) training, among other compliance courses, has brought a claim in the Competition Appeal Tribunal (CAT) under section 47A of the Competition Act 1998 for alleged anti-competitive behaviour.

Socrates asserts that 'at some point, believed to be early in 2015' the Law Society mandated that over 3,000 CQS-subscribed firms 'buy both AML online training and [mortgage] fraud training', therefore abusing its dominant market position and reducing the competition for training providers. The Law Society believes the claim to be 'wholly without merit'.

Bernard George, a solicitor and Socrates director, said that he 'fully expected' Socrates to win the case but warned of the dangers for the profession if not.

'It will mean the Law Society can award itself training monopolies for any firm or any lawyer that has a Law Society accreditation. That is many thousands of firms and tens of thousands of lawyers, all having to buy whatever training the Law Society wants to sell them. That could devastate the competitive training market.'

He added that the Law Society should run schemes like the CQS 'to ensure accredited lawyers are competent, not to sell training'.

'Firms are caught, as the CQS is virtually a "must-have" if you are going to do residential conveyancing. Without it many mortgage lenders will not let you handle their transactions. There is absolutely no need for the Law Society to be a monopoly training provider, except that it is a nice earner.'

'Disproportionate' costs

The case is the first to be allocated to the new CAT 'fast track' and will come to trial at the start of November. The claimant is seeking damages, interest, a declaration that the tying clause is illegal and unenforceable, and an injunction restraining the defendant from continuing to abuse its dominant position.

At the second case management conference earlier this week, the Competition Employment Tribunal heard that Norton Rose Fulbright, representing the Law Society, proposed costs of £640,000 for the 'four-day trial'. Mr Justice Peter Roth labelled the figure as 'disproportionate' and set the maximum cap on the Law Society's recoverable costs from Socrates at £350,000.

Norton Rose also claimed that it had run up costs of £171,000 plus VAT in the first seven weeks of representing the Law Society from 25 April to 10 June, as a result of over 450 hours of work. Roth J described the time spent as 'extraordinary'.

The claimants, represented by Philip Woolfe of Monckton Chambers, applied for disclosure from the Law Society of CQS subscription numbers and AML training revenues since 2014 in a bid to calculate the appreciable impact on the market.

In response, Kassie Smith QC, also of Monckton Chambers, who was instructed by Norton Rose Fulbright, offered to provide the number of CQS accredited firms, the date of accreditation and the number of relevant fee earners at the date of application as well as the total revenue for CQS training post 2013. This was accepted by the Claimants and approved by Roth J.

Voluntary accreditation schemes

The case has called into question the legitimacy of voluntary accreditation schemes. Crispin Passmore, executive director of policy at the Solicitors Regulation Authority (SRA), believes there must be convincing evidence that the benefits of such schemes outweigh the costs.

'To enhance public protection, the accreditation must be robust and independently quality assured. Evaluating the impact on quality and any barriers to accessing services should be part of that consideration. And to be credible, some solicitors must fail to meet the standard.

'There is little evidence that the public use accreditation schemes to help them choose their lawyer. Could access to complaints data or customer feedback do more to help the public choose? Where people get information from also matters - the public need to be able to choose the source that suits them. That might include independent, authoritative sources with no interest in promoting services, or comparison websites that allow public comment.

'Voluntary accreditation schemes are usually marketing opportunities for lawyers and profit centres for those that offer them. Before spending money on them, law firms might want to see evidence that the benefits really do outweigh the costs for them and their customers.'

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