The Competition and Markets Authority (CMA) has announced a study of the legal services sector for consumers and small businesses so as to examine “long-standing concerns” about affordability and standards of service.
The CMA said concerns had also been raised about the “complexity of the current regulatory framework”.
The market study is an initial step that could result in the CMA making recommendations to government, taking “competition or consumer law enforcement action” or moving on to an in-depth investigation.
The government has already announced its plan to launch a consultation on removing barriers to entry for alternative business structures (ABSs) and making regulators independent from representative bodies.
The CMA said the three key issues were whether customers can “drive effective competition” by making informed purchasing decisions; whether they are “adequately protected” from potential harm or can obtain satisfactory redress; and how the regulatory framework impacts on “competition for the supply of legal services”.
It said that with around 600 ABSs now licensed,”the CMA considers that this is an appropriate time to look again at their impact. However, since the Legal Services Act 2007 is now nine years’ old and in light of [various developments], the CMA considers that a more comprehensive examination of the supply of legal services, putting the use of ABSs into context, is merited”.
The market study will encompass both regulated and unregulated legal services, with only criminal work carved out because of its different nature.
The focus will be on individuals and small businesses, because larger businesses are “more likely to be repeat purchasers of legal services and to have access to expert advice (including in-house legal advice) which would enable them to navigate the legal services sector with greater effectiveness”.
There will be a more detailed examination of wills and probate, and employment law services to individuals and small businesses, as ‘case studies’.
Rachel Merelie, senior director at the CMA, said: “Whether it’s buying a property, resolving disputes or getting expert advice on financial and employment matters, it’s vitally important that consumers and small businesses can access the legal advice and representation they need.
“They also need to secure value for money and quality when purchasing these services. These are all areas that can have a major impact – both personally and financially – on the lives of individuals and on the success of small businesses.
“We would be concerned if customers are not getting a good deal, either because they do not know what to expect when purchasing a legal service, or because they are not seeking appropriate legal support in the first place.
“Not being equipped with the necessary knowledge stops customers exercising choice and prevents competition working effectively. We want to see if some customers end up paying more than they expected or receive a poor service. We also think there may be questions over the redress available if this does happen.”
The CMA cited last year’s tracker survey for the Legal Services Consumer Panel, which found that one in ten consumers believed the service they received was poor value for money and the Kingston University report for the Legal Services Board, which found that only 13% of businesses viewed lawyers as cost-effective.
Legal Services Board chief executive Neil Buckley said: “A major problem in legal services is that a large proportion of the population and small businesses cannot afford such critical services.
“The functioning of the legal services market has without doubt improved since the introduction of the Legal Services Act but it still has a long way to go before it can be said that it is an effective market. This study offers a clear opportunity to assess where the legal services market stands today.”
Paul Philip, chief executive of the Solicitors Regulation Authority, said: “It is crucial that the legal services market works in the public interest and serves all consumers. We welcome all and any efforts to promote that goal and that is why we are pleased the CMA is conducting this study and will offer our help as they do so.”