Martin Partington: Spotlight on the Justice System

The Key Findings of the research were:

1. For profit unregulated providers make up a small proportion of the legal services market. In the individual legal needs survey, they represented 4.5-5.5% of cases in which consumers paid for advice or representation.
2. In contrast, not for profit providers, most of whom will be unregulated, accounted for approximately 37% of all legal problems where advice was sought.
3. Benefits for consumers include lower prices and greater price transparency compared to regulated providers, innovation and service differentiation, and competitive impact on regulated providers.
4. The main risks to consumers relate to consumers not making informed choices and misleading advertising claims. The research did not assess the technical quality of work.
5. Consumer satisfaction with customer service is broadly comparable across regulated and unregulated providers – 84% versus 81% respectively.
6. More than half of consumers who instruct for profit unregulated providers are aware of their regulatory status. Of those who don’t check, a significant proportion do not do so because they assume that they are regulated.
7. There is a limited potential market for voluntary regulation beyond existing trade associations given the size of the market and low appetite for such initiatives among providers.

For the time being, at least, the policy conclusions for the Legal Services Board are that

1. The for profit unregulated sector is smaller than expected, although in some segments these providers have gained a significant market share.
2. Based on the evidence of benefits and risks to consumers and limited potential market for voluntary regulation beyond existing trade associations, the LSB will monitor developments but will not pursue a voluntary arrangement under the Legal Services Act.
3. Consumers should be encouraged to check whether or not providers are regulated.

In other words no active intervention for the moment.

Notwithstanding these broad conclusions, the research did look more closely at the work of for profit unregulated providers in three areas: will-writing; divorce; and intellectual property, where not insignificant amounts of legal services work was being undertaken by unregulated providers – around 10% of the work. The dominance in the area of divorce by 5 on-line companies offering very cheap services can be particularly noted.

My guess is that, so long as the unregulated sector provides cost-effective services, with which consumers are satisfied, the lack of regulation will continue. But if there is a highly publicised scandal, then the regulatory context will change.