The Ministry of Justice has issued its response to the study on the legal services market carried out by the Competition and Markets Authority (CMA).
In a letter written to the CMA’s Chief Executive, the Right Honourable Lord Keen of Elie QC issued a response on behalf of the Ministry, stating that the study has been welcomed. He highlighted the commitment of the government to make sure that competition is functioning well in the area, as well as ‘delivering value, quality and innovation for consumers and businesses’.
Mentioning the experiences of consumers in the conveyancing market, for example, he highlighted the issues raised in the report, as well as the recommendations made.
Drawing attention to the lack of transparency and consumer understanding identified in the study, Lord Keen mentioned the drive towards improving the ‘quality and prominence of information on providers’ websites, including information on price, service, redress and regulatory status.’ He stated that these issues had previously been recognised by legal service regulators and that they are now being addressed. This, he said, is now also the case for improving the range and quality of information for consumers, enhancing their ability to choose the right legal professional for their needs.
Lord Keen also draws attention to the recommendations of data access improvements, particularly for the use of comparison tools. Stating that changes in this regard were already being looked into by regulators, he expressed his belief that the recommendations in the report would only ‘provide greater impetus to their work’.
Making his final point in regard to the study, Lord Keen stated that he welcomes the report’s recommendation that the regulators should continue to take steps in removing unnecessary regulatory burdens. This also includes one directed to the SRA, stating that restrictions preventing solicitors from offering non-reserved legal activities from unauthorised firms should be removed.
Lord Keen went on to acknowledge the position of the Legal Services Board (LSB) and expressed his approval of their positive response to the report. Mentioning the introduction of a Programme Implementation Board, he highlighted how this aimed to ‘ensure consistency in response to cross-profession recommendations’ as well as the publication of implementation plans from each of the regulators. Having been reviewed by the LSB, the implementation of these will continue to be monitored.
He also drew attention to the challenges faced by the CMA, largely due to the ‘lack of available evidence, particularly in relation to the extent and range of the unauthorised sector’. Lord Keen went on to express his acknowledgement that some recommendations are aimed at gathering a fuller evidence base in reviewing what additional action may be needed.
When considering this future action, Lord Keen stated that the Ministry of Justice will need to ‘reflect on the impact on the market of the immediate steps being taken by regulators to increase transparency.’ This will be even more prominent if consumer behaviour, in terms of the choice of legal providers, changes as a result. In turn, Lord Keen states that the publication of the study forms part of a continual process, within which, the Ministry will work closely with the Authority as well as the regulators.
He also drew attention to the recommendations made to the government directly, the responses to which, were included in an attached annex document.
These are as follows:
CMA recommends to coordinate changes to content on Gov.uk website and introduce signposting to the Legal Choices website.
This was accepted.
CMA recommends that the MoJ should work with the Legal Ombudsman and self-regulatory bodies in order to consider whether there is scope to adapt existing data sources to collect additional information relating to the unauthorised part of the sector.
This was accepted.
CMA recommends that the MoJ should review whether there is a case for extending the redress to consumers using unauthorised providers and if so, how best to achieve this.
This was accepted. The documents states that the MoJ will review any case made for extending redress to consumers using unauthorised providers, recognising the disparity in the redress available to consumers, depending on their provider. Also acknowledged was the lack of understanding among some consumers when it came to the consequences of certain choices. As well as noting the need for service providers to signpost ADR schemes under the EU Alternative Dispute Directive, it stated that they must also indicate to the consumer whether or not they are a member of a particular scheme.
It went on to state: ‘We agree that there is a general lack of data on the scale and range of unauthorised providers, the extent to which those providers are members of ADR schemes, and the variance in the protections offered by those schemes, preventing any meaningful consideration of the scale of any consumer detriment that may arise from this disparity, and therefore whether there is a case for reform. We will work with the Department for Business, Energy and Industrial Strategy, as the department with wider policy responsibility, to review the existing provision and consider whether further steps are necessary and proportionate. ‘
Where review of regulator independence was concerned, the MoJ acknowledged the concerns of the CMA, particularly in relation to the promotion of innovation whilst balancing consumer protection.
However, it went on to state: ‘We believe that the sector itself can do more within the existing framework. As part of its work plan for 2017/18, the LSB is reviewing the Internal Governance Rules, and will consider, in the light of developments in the sector, what changes may be required. The LSB has recently published consultation papers on this. The LSB is also currently formally investigating whether the governance arrangements between the Law Society and the Solicitors Regulation Authority (SRA) comply with the requirements of the Legal Services Act 2007 and the Internal Governance Rules. The investigation is also expected to consider the balance between appropriate oversight by the Law Society as approved regulator and the ability of the SRA to operate independently as intended by the Act.
‘We therefore believe that now is not the right time to consult on legislative change, and that there is scope to make more progress within the existing framework. We want the LSB to be able to progress its important work, which could lead to further clarity around regulatory independence within the existing framework, without any unnecessary obstacles. We will closely monitor developments in this area and will keep the case for further action under review.’
The MoJ also drew attention to the CMA’s longer term recommendation in regard to reviewing the existing regulatory framework surrounding legal services.
The MoJ notes the issues with the current structure, particularly in regard to the longer term view toward improving transparency and availability of information. It also acknowledged the concerns regarding the inconsistencies in the framework when considering the disparities in the regulatory burdens among providers which are unauthorised and authorised, but offer the same service.
It went on to acknowledge ‘the widely held view that the current reserved legal activities should be reviewed, to ensure that regulation is appropriately targeted to ensure the right balance between consumer protection, wider public interest and competition is achieved.
However, it stated that at present, it was unable to commit to a formal review of the regulatory framework, but would continue to reflect on the possible need for one ‘particularly as the market develops following the steps taken by regulators to address the transparency and consumer knowledge issues that your report identified.’
The full letter and response from the MoJ can be accessed here.
