CMA demands greater transparency from legal service providers
People need better information about legal services to help them shop around more effectively, a CMA study concluded today.
After the completion of a year-long study into the legal services sector, the Competition and Markets Authority (CMA) has concluded that competition in legal services for individual consumers and small businesses is not working well. In particular, there is not enough information available on price, quality and service to help those who need legal support choose the best option.
Obtaining the right service at good value can therefore be challenging as consumers can face wide variations in the cost of similar services. They can also struggle to find enough information to help them identify their legal need in the first place.
The CMA has set out a package of measures which challenges providers and regulators to help customers better navigate the market and get value for money. These changes have been drawn up after discussions with key stakeholders, including the 8 frontline legal regulators, and will be overseen by the Legal Services Board, which will report regularly on progress. These include:
A requirement on providers to display information on price, service, redress and regulatory status to help potential customers. This would include publishing pricing information for particular services online (only 17% of firms do so at present).
Revamping and promoting the existing Legal Choices website to be a starting point for customers needing help, information and guidance on how to navigate the market and purchase services.
Facilitating the development of comparison sites and other intermediaries to allow customers to compare providers in one place by making data already collected by regulators available. At present only 22% of people compare the services on offer before appointing a lawyer.
Encouraging legal service providers to engage with feedback and review platforms to ensure that customers can benefit from the experience of others before making their choice.
Recommending that the Ministry of Justice looks at whether to extend protection from existing redress schemes to customers using ‘unauthorised’ providers.
In addition, as part of the study, the CMA considered the impact of legal services regulation on competition. The CMA found that whilst the current system is not a major barrier, it may not be sustainable in the long term. In particular, the framework is not sufficiently flexible to apply proportionate risk-based regulation which reflects differences across legal services which could harm competition.
The CMA is therefore also recommending that the Ministry of Justice reviews the current framework to make it more flexible and targeted at protecting consumers in areas where it is most needed.
Rachel Merelie, Acting Executive Director for Markets and Mergers, said:
You might not need a lawyer very often but when you do it will often be at a crucial point in your life – whether that’s buying a property, resolving a dispute or getting expert advice on financial and employment matters. So the transparency, affordability and accessibility shortcomings we have identified are a real concern.
Consumers who are equipped with the information they need to assess the services on offer and choose the best deal for them, will not just benefit personally but will also help drive competition, quality and innovation across the whole market. That means a better outcome for everyone and, importantly, fewer people will be discouraged from seeking the help they need.
Around £11–£12 billion a year is spent by consumers on legal services in England and Wales in the area covered by the study – including commercial law, employment law, family law, conveyancing, wills and probate.
The CMA has recommended that frontline regulators work with consumer and small business groups – including the Legal Services Consumer Panel, Citizens Advice, Which?, and the Federation of Small Businesses – to deliver this improved transparency on price and quality as well as clearer guidance on buying legal services.
The CMA has pledged to re-evaluate progress and the impact of the recommendations in 3 years’ time and intervene further if progress is not satisfactory.
Notes for editors
The CMA is the UK’s primary competition and consumer authority. It is an independent non-ministerial government department with responsibility for carrying out investigations into mergers, markets and the regulated industries and enforcing competition and consumer law.
- The CMA launched a market study in January into legal services in England and Wales to see if they are working well for individual consumers and small businesses. In particular, the CMA’s market study has examined 3 key issues:
- whether consumers can drive effective competition by making informed purchasing decisions
- whether consumers 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 CMA published reports of 2 consumer surveys it commissioned to understand the experiences of individual and small business consumers in the legal services sector. The reports covered quantitative and qualitative research conducted by IFF Research with individual consumers and qualitative research conducted by Research Works with small businesses.
The study has focused on the supply of legal services in England and Wales, recognising that Scotland and Northern Ireland have different legal systems, and that regulatory reform is at a different stage in these jurisdictions. However, the CMA plans to use the outcome of this market study to inform any future consideration of similar issues in these countries. Criminal legal services have not been included because the issues the CMA has considered are less relevant to them.
The government announced on 30 November 2015 that it will 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. It said: “This will create a fairer, more balanced regulatory regime for England and Wales that encourages competition, making it easier for businesses such as supermarkets and estate agents among others, to offer legal services like conveyancing, probate and litigation.” On 7 July 2016, the government published a consultation entitled Legal services: removing barriers to competition which deals with its proposals for removing barriers to entry for alternative business models.
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