Family law specialists should be required to work under fixed fees, the Legal Services Consumer Panel has suggested as it ramped up its call for regulatory intervention to improve transparency in the market.
The panel said family law was one area where it advised that regulators “should now consider mandating fixed fees”.
In its response to the Competition and Market Authority’s interim report last month, the panel said it agreed with “the overall finding that competition is not working well in this market because of a chronically weak demand side”.
It said: “Consumers are not empowered with the information they need to shop around or choose the most appropriate legal service provider for their needs. Consequently, their ability to drive competition is hampered…
“Progress has been made, but it has been slow. Providers of legal services are not responding quickly enough to consumers’ need for transparency and predictability, particularly around key choice factors e.g. price and quality.
“This is increasingly concerning because our evidence shows that in some areas of high consumer vulnerability, for example asylum and immigration law, consumers now consider price to be equally as important as reputation, which has traditionally been the key choice factor.
The panel has come under fire from practitioners for its recommendation earlier this year that firms be required to publish ‘average’ prices, which it said would empower consumers’ decision-making processes, in turn driving competition, could help to reduce unwarranted or unknown price variation, and could contain the cost of legal services.
The panel told the CMA that lawyers’ argument that it was impossible to cost services because of the variation in the work they do “disproportionately shifts the risks on to consumers, who are already disadvantaged by virtue of information asymmetry”.
It said: “Moreover, this is not a credible argument when one considers the experience and knowledge firms have in understanding the different directions cases might go in, along with the likely price implications.”
While accepting that there may be legitimate difficulties with offering fixed fee or absolutely accurate estimates in all cases, “the panel is of the strong opinion that the sector can do more to improve transparency and disclose costs more accurately.
“That this is achievable is evidenced by the section of the market offering fixed fees. If fixed fees cannot be offered, then providers of services should give clients a range of prices, using previous experience and professional expertise to cost appropriately.”
It continued: “Fixed fee is the optimum solution especially in areas like family law, where consumers are often at their most vulnerable. In May 2016 the panel published a report identifying three areas of law for the oversight regulator to prioritise in order to enable the market to best meet the demand for legal services. Family law was identified as one such area…
“The panel asked approved regulators to consider how price transparency could be further encouraged in family law to ensure certainty and ease the burden on potentially vulnerable consumers. This is one area where the panel advises that approved regulators should now consider mandating fixed fees, or at the very least there should be an obligation on providers to display their average prices on their respective websites or make these available on request where they do not have a website.”
The panel told the CMA that the inaction over price transparency “warrants regulatory intervention”. “It is the panel’s strong view that mandatory price information is now necessary to redress the current imbalance and apportion risk between providers and consumers fairly…
“Some have argued that average cost is not an indication of real or actual cost. We accept this, we also agree that it may not be useful to all consumers. However, with appropriate caveats, it will be a useful indicator for some consumers, consumer groups or advisory bodies. Moreover, it could be presented in a way that encourages consumers to make more detailed enquiries about cost, thus forestalling the significant number of cases currently referred to the Legal Ombudsman.”
The panel also pointed out that there have been interventions in “comparable markets with similar levels of price complexity and opacity”, such as the CMA itself proposing changes to improve the transparency of retail bank charges, and government plans to ensure dentistry charges and treatment plans are clearer and easier to understand, following a strong campaign by Which?
“This is in an industry where there are already rules requiring dentists to prominently display price lists in their surgeries and set out treatment costs upfront. Yet the government deems it appropriate to intervene because research found that 51% of people visiting their dentists did not see a price list and one in five were not clear about costs ahead of their treatment.
“In comparison, we know that only 17% of legal services providers display prices on their website –in our view this is a compelling reason for intervention.”
Panel chair Elisabeth Davies said: “The overall findings [of the CMA] are indisputable. What we would like to see now is a concerted effort and leadership towards the necessary solutions.
“This must start with the CMA formulating the right remedies, targeted at the right players, and reviewed or evaluated at an appropriate time. The approved regulators and the oversight regulator must also show demonstrable leadership and a real commitment to putting the needs of consumers at the heart of regulation.”