Law Society calls for “innovation sandbox”

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22 August 2016

Law Society: call to protect title of 'lawyer'

Law Society: call to protect title of ‘lawyer’

The Law Society has called for a ‘sandbox’ approach to regulatory reform that would allow changes to promote innovation to be tested safely.

It also came out strongly against the idea of making it compulsory for law firms to publish ‘average’ prices of their services, saying that the market, rather than regulation, should be the tool to improve information provision for consumers.

In its response to the Competition and Markets Authority’s (CMA) interim report, the society agreed that there was more work to be done on improving transparency – as identified by the CMA as a key weakness of the market.

But it continued: “We believe that market-driven solutions can and will plug the transparency of information gap, and that it would neither be wise, nor consistent with government policy, to seek to impose regulatory responses to the information issues which the market study has identified.

“It is important for the remedies proposed to look for ways in which the market can bring about the solutions sought – thereby supporting the desire for deregulation, balanced with consumer protection.

“Wholesale change to the regulatory regime has high costs for both the sector and for the economy as a whole. This report has not provided a theory of harm supported by evidence of actual material harm to consumers, the legal services sector or the economy. In the absence of evidence, we do not believe that a case has been made for revisiting the design of the regime so soon after the last root and branch review undertaken by the Clementi review.”

The Law Society commended the Financial Conduct Authority’s ‘sandbox’ as a way to test the relaxation of regulatory requirements to promote innovation.

“We welcome the SRA’s innovation zone, as a mechanism for feedback around those regulations which legal services providers deem a barrier to innovation and a forum for the sharing of ideas and information around new business models.

“The Law Society believes that a full ‘sandbox’ programme, as a ‘safe zone’ in which innovation can be tested and monitored, would be an appropriate approach to test the changes currently being proposed. Building such approaches into the remedies proposed by the CMA would be a robust way to encourage changes to be explored, whilst also ensuring that there was a method through which impact, cost and outcomes could be measured and assessed before full-scale adoption.”

On pricing, the society highlighted the “challenge of pricing a service that at the outset may be unclear” and that it was also not for regulation to determine how and where fixed fees were most appropriate.

“Rather, we should encourage the market to develop better models for analysing cases and related costs and identify the solutions best suited to the industry and consumer needs. A tool built around a set of comprehensive algorithms – which help to predict likely time and complexity of a case and, in turn, price points would be useful.

“Accuracy of pricing is the core issue, firstly to ensure that consumers are not misled and secondly, for firms to ensure financial viability.”

It added that data on average prices could be called into question when, for example, there were low levels of work being undertaken or a high level of variation in prices due to bespoke requests.

“In areas such as clinical negligence, where the value of a claim can carry from the thousands of pounds to the millions, which is likely to be reflected in the complexity of the case, it is not clear how an average cost would be helpful to consumers or reflective of what they might pay. Care also needs to be taken that this does not result simply in similar prices being offered across the market.

“Any mandatory requirement on providers to publish pricing information would add further burden to regulated legal services providers. We believe that the legal services markets are best placed to consider how to improve transparency and services for consumers to meet their demands and needs.”

On other issues, given that the CMA only looked in depth at three areas of practice – wills and probate, employment and commercial law – the society warned that it “would be potentially damaging to the legal services sector and consumers to impose changes whether by way of regulations or deregulation on any markets outside those which have been subjected to comprehensive research and analysis”.

Chancery Lane added that regulation would not address the problems of unmet legal need caused by legal aid cuts.

It also called on the CMA to rethink its approach to unregulated providers – despite noting the difficulty many consumers have in distinguishing between them and regulated lawyers, the CMA said there was no evidence that they were exposed to material risks as a result – saying: “We do not believe that consumers should be put in a position of having to undertake detailed due diligence before purchasing services in order to understand their right to protection from poor standard of advice.”

The society expressed disappointment at the CMA’s opposition to limiting use of the title ‘lawyer’ to qualified and regulated persons.

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