CMA praises advancements in legal sector, but more can be done

Today, 17 December, the Competition Markets Authority (CMA) has published the findings of its review of the legal services in England and Wales. 

The review has found that the legal profession has made some positive advancements with regards to transparency but more work can be done to continue to improve and more work on the unregulated side of the profession in a bid to reduce consumer harm.

The CMA has now recommended that the Legal Services Board (LSB), work with other regulators in the sector, continue to build on the reforms made so far to improve transparency of information that can help consumers make informed choices, and addresses some aspects of the market study recommendations that still require progression, such as providing more information on quality.

The CMA released a press release, which outlined some of the findings from their review:

Transparency

There are clear signs of progress. For example, many more legal firms are now providing information on price, service, redress and regulatory status to help consumers shop around. However, while the evidence suggests that some customers are taking advantage of the changes, there is still work to do as there only appears to have been a limited impact on the intensity of competition between providers and on sector outcomes. The CMA now recommends that the Legal Services Board (LSB), working with other regulators in the sector, continues to build on the reforms so far and addresses some aspects of the market study recommendations that still require progression, such as providing more information on quality.

Regulatory reform

A number of the CMA’s recommendations, including its initial call for a regulatory review of the Legal Services Act 2007, have yet to be progressed. The CMA considers that the case for reform remains pressing, particularly as there are signs of growth in the unregulated sector, and therefore remains of the view that wholesale reform of the Act is necessary. In the meantime, the CMA considers there is merit in taking shorter term steps which deliver such reform in stages – including, that:

• the Ministry of Justice (MoJ) establish a mandatory public register of unregulated providers, requiring them to provide appropriate redress;
• the LSB review the activities that are reserved to certain legal services providers to ensure that such restrictions are necessary and proportionate.

Andrea Coscelli, the CMA’s CEO said:

“This is an incredibly important sector that people often turn to at a time of great need, which is why the CMA made recommendations to improve consumer outcomes, including through increasing transparency, as well as to address concerns about the way in which the sector is regulated.

“It is positive to see changes that have already been made, but more progress is needed.

“We encourage the Ministry of Justice, the Legal Services Board and other legal services regulators to continue to work towards reform and to make sure the sector works well for consumers long into the future.”

Responding to the review, Sheila Kumar, Chief Executive of the Council for Licensed Conveyancers (CLC), said:

‘It is very encouraging that the CMA has concluded that there is already progress on better information for consumers following the measures we introduced two years ago. We have begun work with other regulators on the next step, to identify quality information that can guide consumer choice. We will also be keeping compliance by CLC regulated practices under regular review in the consumer and client interest.

“We of course understand the thrust behind the recommendation that redress schemes be extended to unregulated legal service providers but trust that there is an understanding that the current redress provision, through the Legal Ombudsman, needs to go through a programme of reform before any extension of its jurisdiction could possibly be considered so that any approach to redress should be proportionate to the cost of the legal service provided and its complexity.”

David Greene, Law Society President, commented:

“We’ve had very constructive engagement with the CMA during this review, they have clearly listened to us and recognise the progress made by law firms.

“The solicitor profession has made significant strides in providing more information for clients on their prices and services and we are pleased to see the CMA recognises this. Kite marks provide further useful indicators on solicitor expertise in specific areas of law.

“Given the pivotal role of the rule of law in the economy and the whole of society, any further reforms should not only focus on competition outcomes, but also on the public interest, the rule of law, access to justice, and an independent, strong, diverse and effective legal profession – all of which are regulatory objectives under the Legal Services Act.

“Competition plays an important part in driving down costs, but there are few winners in a race to the bottom where low cost may be offset by consumer harm.

“With regard to unregulated legal service providers, consumers are undoubtedly at greater risk without the regulatory protections and robust professional indemnity insurance provided by solicitors.

“A review of the unregulated sector could identify high risk areas and specific harms to inform the development of workable and effective regulatory interventions. The current legal regulatory framework is sufficiently flexible for improvements to be made where there is evidence of consumer harm, including through regulation.”

The CMA’s review can be found here.