LSB not convinced by plan to force law firms to publish prices

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1 June 2016

Sir Michael Pitt

Pitt: waiting for the CMA study

The Legal Services Board (LSB) has said that “further discussion and evidence” is needed before it is prepared to back proposals to force law firms to publish average prices.

Responding to a report by the Legal Services Consumer Panel (LSCP), the LSB also said it was important to be “realistic” about mystery shopping exercises, which the panel suggested should be carried out by the Solicitors Regulation Authority (SRA) and Bar Standards Board (BSB)

The LSB said that “despite evidence of weak price transparency”, any regulatory intervention to require publication of average prices would need to be subject to a cost-benefit analysis.

“It is not clear at this stage whether publication of average prices for particular legal services would be more helpful than misleading for consumers.

“Agreeing a methodology for these calculations could be challenging, while the collection of data and the actual publication of auditable/justifiable averages would create a burden for practitioners.

“Further discussion and evidence, including an assessment of the burdens on business and the practicalities of enforcing rules would be needed before the LSB could reach a firm view on this recommendation.”

In Opening up Data in Legal Services, the LSCP called on the SRA and BSB to commission mystery shopping exercises on the quality of legal advice. Other suggested techniques included file review, peer review and academic research.

The LSB said there was “an important point of principle” to consider, that approved regulators “cannot (and should not) directly oversee practitioners” when they serve their clients.

“It is the role of approved regulators to address risks of technical quality, (for example) through setting minimum standards as entry requirements for practitioners, supported by continuing professional development and professional indemnity insurance requirements.”

The LSB warned that research in the area of quality was “likely to be expensive” and “only provide a snapshot in time for a small sample of practitioners”.

It said: “While they might gather evidence through mystery shopping and peer reviews in high-risk areas where it is cost-effective to do so, it is important to be realistic about the viability of such research as a routine tool for delivering consumer protection.”

The LSB had further reservations about another key recommendation of the consumer panel, making publication of first-tier complaints a regulatory requirement for law firms. The LSB currently consulting on the issue of first-tier complaints.

“Other regulators, notably the Financial Conduct Authority, publish first-tier complaints data at firm level. However, it is unclear whether the reputational effects of publishing this data would be as powerful in the legal services market due to the absence of brand names.

“Approved regulators would need to consider the risk of unintended consequences, for example, practitioners discouraging consumers from complaining and the potential burdens that such data requirements may create.”

However, the LSB fully supported the consumer panel’s call for the approved regulators to bring disciplinary findings and basic practitioner/entity registers together, saying it was “pleased to note” that the BSB already published its register and disciplinary findings in one document.

The LSB also agreed with the LSCP that all disciplinary sanctions should be published in full, that approved regulators should research “barriers to price transparency”, and that the LSB and approved regulators should be more vocal about the issue.

In a letter to Elisabeth Davies, chair of the LSCP, Sir Michael Pitt, chairman of the LSB, said the issues raised by the consumer panel were “highly relevant” to the Competition and Markets Authority (CMA) study of the legal services market.

“We will revisit whether there is a need for us to take further action in this area once the CMA has published its findings and possible next steps in the summer,” he added.

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