Choosing a lawyer based on recommendations from friends, family and peers can be “a sensible way to ensure a minimum level of quality”, but it means consumers are not checking for themselves what the market has to offer, the Competition and Markets Authority (CMA) said yesterday.
Its economics director, Chris Jenkins, said there needed to be a “concerted effort to introduce greater transparency of price and service quality in the legal services market”.
Writing on the CMA’s website in the wake of its interim report on the legal services market last month, Mr Jenkins said the rapid growth more generally of digital sales channels, comparison sites and feedback tools, and existing products and services being provided in different ways, could lead to real benefits for consumers – “but only if consumers have the information and confidence to shop around and use new providers”.
In the law, the CMA found that only 22% of consumers had compared two or more providers when choosing a legal adviser.
Mr Jenkins said: “This makes it difficult for new entrants or business models to gain ground. There’s been some innovation – for example, it’s possible for an online law firm to provide legal documents or legal advice without needing a presence on the high street. However, the pace of innovation has been slow, in part because customers seem slow to switch to new providers.
“It also means that some consumers are paying much more than they need to for services where cheaper prices are available. Research suggests the price of a standard simple will may vary from around £110 to £200. The price for a complex divorce with a dispute over assets may vary from around £1,260 to £3,000.
“Recent Legal Services Board research found that only 17% of providers publish their prices online. And in contrast to other sectors, there are very few comparison websites available to consumers. Those sites that do exist or are trying to launch find that some legal service providers are unwilling to co-operate.
“We think that there needs to be a concerted effort to introduce greater transparency of price and service quality in the legal services market.”
The CMA set out its initial thoughts on how this could be done in its interim report – such as requiring providers to publish prices, issuing guidance on best practice principles for transparency, and publishing consumer feedback and complaints data.
Mr Jenkins said regulators have a key role to play in this. “Traditionally, regulation has focused on protecting consumers directly, for example by capping prices or setting minimum quality standards.
“But increasingly regulators can also help to stimulate innovation and new business models and help consumers to protect themselves by giving them the tools and confidence to engage in new markets.”