Competition law: LSB warns 'Watch this space' on investigating law firm mergers

Showing the regulator's reluctance to be drawn too much on the question of 'access to justice', chair of the Legal Services Board (LSB), Sir Michael Pitt, has commented that the situation was a 'political choice' of the previous two governments, and that the LSB's concern lies with 'the fallout from these political decisions, in terms of people failing to get the legal advice they would have got [previously].'

Sir Michael made the comments at the LSB's 'Meet the Legal Services Board' event, held last week in Leeds, where chair of the event, Michael Napier QC, pressed Sir Michael further on the subject, suggesting the government is not pulling in the same direction as the oversight regulator Access to justice is, of course, one of the eight regulatory objectives of the LSB and enshrined in the Legal Services Act, by which, Sir Michael had added, all of the decisions of the oversight regulator were made.

When asked by the Legal Compliance Association (LCA) whether it was possible that Lord Chancellor Michael Gove might use a planned review of the Legal Services Act to align the oversight regulator's objectives with the political intentions of the government, Sir Michael remarked Gove's primary worry was with the markets - 'I think he is currently looking for a source of funding to resolve the access to justice question,' he said, alluding to fears of self-funding via a pro bono levy.

Consolidation and competition law

Another topic for discussion - and following immediately on from the Irwin Mitchell-Thomas Eggar merger announcement that day - was arguably why the competition authorities have not yet got involved with any legal services mergers; the market is consolidating at a rapid pace, with several firms getting bigger and bigger, naturally decreasing competition.

'Yes, that's true', Sir Michael agreed, 'the legal market is something of an overlooked sector in that respect.'

When asked whether competition authorities will one day want to investigate law firm mergers, Sir Michael simply gave a telling reply: 'Watch this space'.

Sector-specific regulation

Following on from talk on law firm mergers, Sir Michael also spoke to the LCA about sector-specific regulation - meaning type and size of firm - becoming a formal reality.

'I don't think we should throw away a structure that we already know is not working, only to replace it with a new structure that we are not sure will work or not, though.'

He continued: 'The way I would prefer to look at it is to take a risk-based approach. We are doing some work with Professor Stephen Mayson and we are going right back to first principles. What are the biggest risks in the legal sector? What are the lowest risks? If you look at something like cost lawyers or patent attorneys, the risks there are quite low because if something goes wrong they will just sort it out between themselves.'

The chair of the LSB also said that, in the case of a large scale commercial firm, a similar system could also be put in place.

'If the train develops a fault, they are going to stop, because ultimately they don't want to lose their client. We do talk to the London law firms and there are some very capable individuals in those firms and they have their own systems for working things out between themselves.'

Leah Darbyshire is community manager of the LCA and head of events at ARK Group

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www.legalcomplianceassociation.co.uk