The Competition and Markets Authority (CMA) today announced a three-month review of the progress made in improving competition in the legal services sector for consumers and small businesses.
It will also be the first official body to consider the findings of Professor Stephen Mayson’s independent review of legal services regulation (IRLSR) this summer on reforming the legal regulatory landscape.
When it issued its market study on the legal sector in December 2016, the CMA said that, if it were not satisfied with the progress that had been made, it would consider whether further action was needed.
Speaking earlier this year, when he confirmed the plan for the progress review, Chris Jenkins, the CMA’s economics director, said there has been “good progress” on the regulators implementing the recommendations on transparency, but less so in relation to consumer protection, with the issue of redress for clients of unregulated providers “still to be resolved”.
The market study concluded that competition for individual consumers and small businesses was not working well.
The CMA made recommendations to regulators to improve transparency by firms on price, service, redress and regulatory status; to promote the use of quality signals by providers and issue guidance for providers on engaging with online reviews; and to enable customers to navigate the sector more easily and get value for money.
It also made recommendations on regulatory reform, including to the Ministry of Justice, to consider whether consumers of unregulated services need stronger protections, particularly in terms of access to redress, and to review the regulatory framework for the longer term.
Issuing a ‘call for inputs’ from interested parties, the authority said today that a primary focus of the review would be to assess the extent to which competition has developed since publication of its report.
“For this purpose we will be assessing both the progress made in implementing transparency measures and other remedies proposed by the CMA to promote competition, and their effectiveness to date.
“We recognise that it is likely to be too early to carry out a full assessment of the impact that the remedies have had, but we will look at initial indicators to this effect.”
The CMA said it recognised that access to better information on price and service may not be sufficient to drive customer engagement up to the levels needed for a fully competitive market.
“We will consider what further intervention may be needed… We currently have three main areas of focus in mind: improving our understanding of consumer behaviour in response to transparency remedies to facilitate better remedy design; the development of quality indicators; and exploring any barriers to the further development of DCTs [digital comparison tools].”
This latter issue will include whether comparison websites do not see the legal sector as a priority growth area or cannot obtain the necessary comparable information. “In particular, we will aim to understand the inputs DCTs require to operate viably across the different areas of law.”
In May, the Ministry of Justice said a review of the Legal Services Act 2007 was not on the agenda, and so the CMA said it would look mainly at the extent to which “a regulatory framework that addresses the concerns we identified in the market study could be developed within the current regime under the Act”.
In doing so, it would consider the work the Legal Services Board is already doing on this.
It went on: “This analysis will enable us to assess whether we remain of the view that only a wholesale review of the regulatory framework by the MoJ will achieve effective change that can promote competition and optimise consumer outcomes (including the provision of appropriate protections) in the longer term.
“The review will consider the findings of the IRLSR, alongside other regulatory developments and wider stakeholder views, for this purpose.”
The CMA noted that Professor Mayson recommended that, in the short term, currently unregulated providers of non-reserved legal activities should be brought within the scope of existing regulation through the Legal Services Board creating a public register of providers and bringing them within the scope of the Legal Ombudsman.
“We will assess whether, in principle, the IRLSR recommendations would remedy the redress gap we identified in our market study,” it said.
The review should report in December and may include new recommendations for government, regulators and others.