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CMA to study legal services market over standards and regulatory concerns

'We would be concerned if customers are not getting a good deal', says senior director

14 January 2016

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By John van der Luit Drummond, Deputy Editor,Solicitors Journal

Concerns over standards and affordability of legal services, along with the complexity of the regulatory framework, are to be examined by the Competition and Markets Authority (CMA).

Commissioned by the government, the CMA’s market study will examine whether customers can ‘drive effective competition by making informed purchasing decisions’; whether there are adequate protections in place to redress instances when legal services go wrong; and how regulation impacts on competition for the supply of services.

CMA senior director Rachel Merelie said the authority would be concerned if customers were found to be ‘not getting a good deal’.

‘Not being equipped with the necessary knowledge stops customers exercising choice and prevents competition working effectively,’ she added.

‘We want to see if some customers end up paying more than they expected or receive a poor service. We also think there may be questions over the redress available if this does happen.’

The government announced in November 2015 that it was to launch a consultation on removing barriers to entry for alternative business models in legal services and on making legal service regulators independent from their representative bodies.

This, it said, would create a ‘fairer, more balanced regulatory regime’ that encourages competition and makes it easier for businesses, such as supermarkets and estate agents, to offer conveyancing, probate, and litigation services to the public.

Around one in ten users of legal services have said that the overall service and advice provided to them was poor value for money, according to the findings of a recent survey.

In addition, just 13 per cent of small businesses viewed lawyers as cost-effective. Around half agreed that they used legal service providers as a last resort to solve business problems.

Iain Miller , head of regulation at Bevan Brittan said the study will set the agenda for a future wider reform of legal services in the UK and Europe.

‘Just as consumer complaints shaped the Legal Services Act, competition in the consumer market is likely to shape the next Act,’ he commented.

‘All law firms share the same regulatory framework, so although this announcement is primarily focused on consumers, we can expect it to inform the Ministry of Justice’s consideration of the issues when it does its full review, which is expected later this year.’

The Solicitors Regulation Authority has welcomed the CMA study. ‘It is crucial that the legal services market works in the public interest and serves all consumers,’ said the regulator’s CEO, Paul Philip.

‘Over the past two years, our programme of regulatory reform has prioritised opening up the market and encouraging growth and innovation. We believe that will benefit both the public and the profession,’ he added.

‘The government’s proposals to make legal service regulators independent from their representative bodies would also strengthen the market and help make regulation more efficient and effective.

‘Making this change would also cut costs, which will benefit solicitors and law firms and their clients, as well as boosting public confidence.’

Also responding to the announcement was Neil Buckley, chief executive of the Legal Services Board, who commented: ‘This decision reflects long-standing concerns about both the affordability and quality of legal services on offer. 

‘A major problem in legal services is that a large proportion of the population and small businesses cannot afford such critical services. 

‘The functioning of the legal services market has without doubt improved since the introduction of the Legal Services Act but it still has a long way to go before it can be said that it is an effective market.’

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