The monitor makes the case that competition is stifled because prices for legal services are not easily accessible, thereby harming consumers.
Regulators must consider forcing law firms to publish rates for legal services much like dentists do, the UK’s legal services consumer watchdog is pushing.
In a response to the interim report on legal services of the Competition and Markets Authority (CMA), the Legal Services Consumer Panel (LSCP) agreed that “competition is not working well” the legal services market due to “a chronically weak demand side.”
“Consumers are not empowered with the information they need to shop around or choose the most appropriate legal service provider for their needs. Consequently, their ability to drive competition is hampered,” Elisabeth Davies, LSCP chair, wrote to Maria Rican-Sevitz, CMA assistant project director.
“Progress has been made, but it has been slow. Providers of legal services are not responding quickly enough to consumers’ need for transparency and predictability, particularly around key choice factors e.g. price and quality,” she wrote.
The panel said in its response that only 17% of legal service providers display pricing information on their websites.
The LSCP, noting that they have long advocated for easily accessible pricing information for the legal services sector, said that they are still “convinced that regulatory intervention is needed’ to ‘redress the current imbalance and apportion risk between providers and consumers fairly.”
If legal services providers are not forced by a regulatory intervention, they won’t be incentivised to be transparent on price, the panel said.
It argued that “risk will continue to be borne disproportionately by consumers, and the uncertainties that fuel the perception of high legal costs, even where this is not the case, will deter even more consumers from seeking legal advice.”
Regulation is the wrong route, argues law society
The Law Society of England and Wales, on the other hand, believes that regulation that forces the legal services providers to publish pricing information is not the right route.
“Well-functioning legal markets are in the best interests of clients and promote a strong and vibrant legal sector. They also underpin fair competition and access to legal services,” said Catherine Dixon, the law society’s chief executive.
“Where possible, solutions driven by the market are preferable to those driven by regulation and we believe that our legal services market is competitive and will continue to evolve and innovate to meet the needs of clients ever more effectively. We therefore welcome the CMA's conclusion that no formal market investigation is needed.”
Warning of an imbalance in an “ecosystem” that “can be easily disrupted,” Dixon noted: “The imposition of burdens - regulation and changes to regulation on the legal sector outside the three areas studied by the CMA - could have significant impact on employment, economic output and on the standing of England and Wales as a jurisdiction of choice.”
“Some of the effects of a disruption to the market are measurable. Our research indicates that a decrease in the legal sector's value of 1 per cent would lead to a loss of £307 million in the sector’s gross value added and the loss of over 5,500 jobs across the economy in the first year. Whereas for every 100 jobs created in the legal sector, a further 67 are created in the wider economy,” she added.
The law society said the legal sector contributes £25.7bn to the UK economy, growing steadily throughout the past few years.
