CMA report reignites regulatory independence row

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11 July 2016


Doerries: no evidence that the current arrangements for regulation are not working

Doerries: no evidence that the current arrangements for regulation are not working

Friday’s Competition and Markets Authority (CMA) report on legal services has reignited the debate over independent regulation, with both the Solicitors Regulation Authority (SRA) and Bar Standards Board (BSB) welcoming the call for separation from their representative bodies.

Though the report saw pros and cons in both retaining and replacing the current regulatory regime, the CMA did come out in favour of the legal regulators having “full independence” from the providers they regulate.

Just the previous day, the Ministry of Justice had said that it would consider the detail and timing of a consultation on regulatory independence, “in the context of the preliminary findings of the Competition and Markets Authority study”.

SRA chief executive Paul Philip said: “I am pleased that as a key principle the CMA has said that regulation should be fully independent from the providers of legal services.

“Modern, independent regulation is what the public expect. It supports the development of a competitive legal market and can only increase confidence in both legal services and those who provide them.”
BSB director-general Dr Vanessa Davies said she too welcomed the CMA’s support “for the principle that regulators must be fully independent from the providers whom they regulate”.

The representative bodies, unsurprisingly, took the opposite view.

Law Society chief executive Catherine Dixon said the current system “seems to be working effectively and importantly regulation is operationally independent”.

She added: “Although we don’t think now is the time for change, we do agree that simpler and better regulation which focuses on applying consistent regulatory rules to protect buyers of legal services across the market is desirable.

“We think the current definition of regulation is way too broad because it includes professional standards, legal education and training plus entry into the profession, regulatory rules, engagement and awarding the professional title of solicitor.

“The current role of the regulator is beyond what is necessary to protect clients, creating bureaucracy and unnecessary cost.”

Ms Dixon reiterated the society’s argument that professional standards should be owned and driven by the profession. “It is clear that the CMA does not think regulation should be linked to professional title – and we agree. This would address the point that solicitors are regulated for everything they do and are competing against unregulated providers which is causing public confusion.”

Bar Council chairman Chantal-Aimée Doerries said: “From the Bar’s perspective there is no evidence that the current arrangements for regulation are not working in the way that Parliament intended when it enacted the Legal Services Act in 2007, through the separation of regulatory from representative functions. The Bar’s ring-fenced regulator, the Bar Standards Board, is fully independent of the Bar Council.

“A single regulator, or consolidation of regulators, could not only result in the loss of expertise, as the CMA recognises, but could also lead to higher costs being imposed on lower risk providers like the Bar. This would not be in the public interest.”

In response to other aspects of the CMA report, the Federation of Small Businesses – which had told the authority that the legal market was failing its members – welcomed the findings.

Chairman Mike Cherry said: “Many small businesses could benefit from greater use of legal services, but currently the market is complex and difficult to navigate.

“Smaller firms can often fail to recognise a problem as a legal issue, or assume a legal resolution to be too expensive, time consuming or risky to pursue. Greater transparency on price and quality of legal services will encourage more small businesses to seek expert advice when necessary.

“We’re pleased the CMA is now looking to close the gaps in the market we identified, improving the legal services industry for small businesses.”

The Legal Services Consumer Panel said the findings reinforced its own report earlier this year on open data, which showed how the legal sector is trailing behind comparable sectors in giving consumers the information they need to make informed decisions.

Its recommendations included that firms should require the publication of the average cost of services on their websites.

Panel chair Elisabeth Davies said: “Effective information is at the heart of effective competition. That’s what the CMA’s report clearly demonstrates and this is what the panel has been calling for. Six years’ worth of our tracker surveys have consistently shown that consumers just aren’t shopping around enough; they can’t access the information they need.”

Mr Philip said the SRA agreed that “significantly improving information for the public and driving an open, healthy competitive legal market that provides affordable services” was the best way to deal with unmet legal need.

Ms Doerries said the Bar Council would work with the CMA “to consider ways in which information about the services provided by the Bar, compared with unregulated legal service providers, might be improved for the benefit of consumers”.

Legal Services Board chief executive Neil Buckley said the CMA report reflected “long-standing concerns about both the affordability and quality of legal services on offer, and the fact that a large proportion of the population and small businesses cannot afford such critical services”.

He added: “We continue to see this study as a unique opportunity to see exactly how well the market is working for consumers and small businesses. This study also complements the LSB’s own efforts to break down regulatory barriers and tackle unmet legal need…

“We believe that the shortcomings of the legal services market must be addressed.”

Ms Dixon argued that the market for legal services “is already competitive”, and said recent research showed that “solicitors were already more likely than other advisers to provide information on costs and indicate how long the work would take”.

She added: “We will work with the CMA to support solicitors to provide ever more relevant information to their clients, this will help clients to make informed decisions about the legal services they buy.”



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