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LSB backs CMA call for greater law firm transparency – but says regulatory reform must happen too

Buckley: transparency can be improved and consumers empowered [1]

Buckley: transparency can be improved and consumers empowered

The Competition and Market Authority (CMA) was right to conclude that there needs to be more transparency of price and service quality in the legal market, the Legal Services Board (LSB) said today.

In its response [2] to the CMA’s interim report last month [3], the oversight regulator said the absence of such indicators “inhibits consumer choice, reducing the incentives for providers to compete on price, quality and innovation”.

However, it said other inherent features of the market – the infrequency of legal need, distress purchases and desire for personal recommendation due to the “emotional context” of some legal services – made it challenging to rely on consumers alone to actively shape the market.

This meant said transparency measures have to be combined with both short and long-term regulatory reform to address other features of the legal market that affect competition, such as a “legacy of strong professional identities [that] fosters collective norms and behaviours within professional groups that can mute competition between providers”.

It explained: “The current statutory framework for the regulation of legal services is not risk-based but is instead structured around professional groups and focused in part on professional titles, thereby embedding these cultural barriers to competition.”

The LSB response added: “Although improvements to the existing regulatory framework to encourage more competition can still be made, we consider the scope for progress may be limited when professional titles and the reserved activities remain the key building blocks underpinning the current arrangements.

“The lack of full independence between regulators and representative bodies and the multiplicity of regulatory bodies (one for each professional group) are other competition limiting features also ‘locked in’ by the Act. Only incremental changes can be made to address these issues without significant legislative reform.”

The CMA also came out in favour [4] of the government proposal last November to make the frontline regulators like the Solicitors Regulation Authority and Bar Standards Board fully independent from their professional bodies.

A consultation is now overdue, and in a clear bid also to get the post-referendum government to refocus on the issue, the LSB said it would be “helpful” if the CMA made an explicit recommendation in its final report that the planned consultation should proceed.

LSB chief executive Neil Buckley said: “We welcome the CMA’s interim report. It provides a clear analysis of the legal services market, its strengths and weaknesses and sets out a range of proposals as to how the market needs to work better for consumers.

“We believe that transparency can be improved and consumers empowered. However, we believe there are other inherent features of legal services which make it challenging to rely on consumers alone to actively shape the market.

“Well-designed market transparency measures need to be advanced in tandem with regulatory reform of the legislative framework as this could contribute directly to increasing competition in this sector.

“We look forward to working with the CMA to help them shape a set of transparency remedies and other measures that are practical, proportionate and consumer friendly.”