Martin Partington: Spotlight on the Justice System

Keeping the English Legal System under review

Posts Tagged ‘cost of legal services

Competition and Market Authority Interim Report

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On 24 January 2016 I noted here that the Competition and Market Authority was going to undertake a new survey of the Legal Services Market to see whether it was working as effectively as it should to deliver innovative, quality and cost-effective services, especially to individuals and small businesses. They promised an interim report on July 2016.

Well, the CMA has been as good as its word and an initial, interim report has just been published. This triggers a further period of consultation with a final report merging early in 2017.

The ‘nuclear option’ for the CMA is what is known as a full-scale investigation into the market under review. This can take a lot of time and be very disruptive for the industries affected. The Legal Services Market so far seems to have avoided this outcome – which I suspect comes as a considerable relief to practitioners and their representative bodies – the Bar and the Law Society.

But it is far from the case that the CMA has given the Legal Services Market a clean bill of health. On the contrary, it is very critical of the ways in which many legal services are delivered, which have failed to keep pace with developments in other service sectors.

The headline findings are:

  1. the Competition and Markets Authority (CMA) has provisionally found that competition in legal services for individual and small business consumers is not working as well as it might. While there have been some positive developments, such as an increased use of fixed fees for more commoditised services, the CMA has found that upfront information on price and quality is often not available to consumers in order to allow them to compare offers and choose the one that most suits their needs.This is because few service providers (17%) publish their prices online.
  2. It is also difficult for providers to signal quality in this sector and there are a lack of digital comparison tools to make comparisons easier for consumers.As a result only a minority of individual consumers (22% according to our survey) compare providers before choosing one.
  3. This may reduce the incentives for providers of legal services to compete. This lack of competition may mean some providers are able to charge higher prices when substantially cheaper prices are available for comparable services.
  4. The CMA has also considered whether legal services regulation has an adverse effect on competition. Its provisional view is that this regulation does not create significant barriers to entry or distort competition between regulated and unregulated providers of legal services.
  5. However, the CMA thinks that the current regulatory regime does impose significant costs on providers that in some cases may be excessive relative to the benefits in consumer protection. While the CMA welcomes the liberalising steps that have already been taken by regulators to address these issues within the current regulatory framework, the CMA is open to more fundamental change of the regime. However, at this stage it believes that there is a risk that such change might lead to increased regulation and might involve significant transitional costs as well as regulatory uncertainty.
  6. It has noted the complexity of the current regulatory framework with its multiplicity of regulators and questions around regulatory independence. In this context, the CMA notes that the government intends to examine the issue of regulatory independence.

The services covered by the market study include areas such as commercial law, employment law, family law, conveyancing, immigration, wills and probate and personal injury and represent an estimated annual turnover of around £11 to £12 billion. In carrying out its market study so far, the CMA has surveyed individual and small business customers, analysed existing data and research and heard from a wide range of interested parties.

What is clear is that pressures on legal service providers to adopt different and more transparent working practices are still very much in evidence and that failure to take heed of these recommendations could ultimately result in more draconian measures being adopted by regulators.

Further detail about the report can be found at https://www.gov.uk/government/news/cma-seeks-views-on-ways-to-help-legal-services-customers

 

 

 

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Written by lwtmp

July 12, 2016 at 2:37 pm

Legal services for small businesses: room for improvement

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An analysis of small businesses’ experience of legal problems, capacity and attitudes is the name of a report  published in October 2015 for the Legal Services Board by the Small Business Research Centre at Kingston University. The key findings do not, in my view, make for comfortable reading by solicitors, but they may also suggest that some important business opportunities are being missed by law firms who could be offering cost-effective services to small businesses.
The Key Findings are:
Business problems decline but are costly
  • The number of legal problems faced by small firms reduced significantly over the last two years reflecting better trading conditions. The most common problems related to trading, employment and taxation. Other businesses were the main source of problems.
  • Half of firms reporting a legal issue said it had a negative impact; one-quarter of them reported loss of income and one-fifth reported health related problems. Total annual losses to small firms due to legal problems is estimated at £9.79bn.
  • Larger small businesses, and businesses with BME and disabled business owners-managers, were most likely to experience problems.
Limited engagement with legal service providers
  • The large majority of firms had little contact with legal advisers. Less than one in 10 either employed in-house lawyers or had a retainer with an external provider. Over half of firms experiencing a problem tried to resolve it  by themselves. When advice was sought, accountants were consulted more often than lawyers.
  • There was a marked decline in the use of external support providers between 2013 and 2015, reflecting the decline in problems. Use of solicitors in the previous 12 months fell from almost 20% to almost 10%; and accountants from over 60% to just over 49%.
Mixed attitudes to legal service providers
  • Only 13% of firms viewed lawyers as cost effective – little improved since the LSB’s 2013 survey. Microenterprises were the least likely to view lawyers as affordable.
  • Almost 50% of respondents strongly agreed or agreed with the statement that they use legal service providers as a last resort to solve business problems compared with 12% who disagreed strongly or disagreed.
  •  Satisfaction that law and regulation provide a fair trading environment increased from 30% in 2013 to 45% in 2015 – improving economic conditions as well as improvements in the regulatory environment may explain this change.

This report was one of the items used by the Competition and Markets Authority in deciding to undertake a Market Review of legal services.

To read the research report in full go to https://research.legalservicesboard.org.uk/wp-content/media/PUBLISH-The-legal-needs-of-small-businesses-19-October-2015.pdf

Written by lwtmp

January 24, 2016 at 12:27 pm

Regulation of the Legal Profession: Competition and Markets Authority gets in on the act

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After the regulatory upheavals which led up to the Legal Services Act 2007 and the creation of the Legal Services Board, lawyers might have been forgiven for thinking that the regulatory playing field might be left untouched for a bit. But no. The Competition and Markets Authority announced in January 2016 that it was going to take a close look at competition in legal services provision by launching what is called a Market Study.

The Press release of the annoucement states:

The Competition and Markets Authority (CMA) will examine long-standing concerns about the affordability of legal services and standards of service. Concerns have also been raised about the complexity of the current regulatory framework.

In light of these concerns, the CMA’s market study plans to examine 3 key issues:

  • whether customers can drive effective competition by making informed purchasing decisions
  • whether customers are adequately protected from potential harm or can obtain satisfactory redress if legal services go wrong
  • how regulation and the regulatory framework impact on competition for the supply of legal services

The announcement also stated: According to recent surveys …  around one in ten users of legal services in England and Wales have said that the overall service and advice provided to them was poor value for money …, [and] amongst small businesses, only 13% said they viewed lawyers as cost-effective and around half agreed that they used legal service providers as a last resort to solve business problems.

The outcomes of a Market Study are very varied, and may range from a finding that all is well and that no further action need be taken, to a full scale investigation into the particular market.

The time line for the present study is that after a very short consultation (ending early Feb 2016) an interim report will be published in July 2016, with a final report at the end of the year.

For further information go to https://www.gov.uk/government/news/legal-services-study-launched-by-cma

This also provides links to some of the reports on which the case for launching the Market Study is based.

Written by lwtmp

January 24, 2016 at 12:00 pm