Price transparency “unlikely to inform decisions”

Sako: Consumers do not fully understand what they are purchasing

The emphasis put on price transparency and comparison shopping by the Competition and Markets Authority and adopted by legal regulators is unlikely to help people make a judgement on what they are buying, a study has concluded.

Meanwhile, legal technology as it currently stands will probably not transform the effectiveness of law firms catering to individual clients, and the gap between larger and smaller practices is likely to continue, the report analysing how tech might ‘level the playing field’ between the two said.

An update to an Oxford Univeristy report commissioned two years ago by the Solicitors Regulation Authority – which examined the view that technology and innovation could improve the quality and efficiency of service delivery and satisfy unmet legal needs – it was published by Oxford professors Mari Sako and John Armour as part of a programme looking at artificial intelligence (AI) in English law.

Their academic paper, Lawtech: leveling the playing field in legal services?, divided the legal market into PeopleLaw and BigLaw as a way of separating services aimed at individuals and corporate clients respectively.

It described legal services as “credence goods” which consumers are not in a position to really understand, like medicine that people take on trust when prescribed it by doctors.

Legal advice was similar, they said, making it “unlikely a policy focus on price transparency and comparison shopping emphasised by the UK’s Competition and Markets Authority” would empower consumers who do not fully understand what they are purchasing.

The report asked whether legal tech could help the two sectors converge and thereby improve access to legal services by reducing costs and therefore unmet need.

The authors hoped that results from the shake-up of the market by the Legal Services Act 2007 relative to the US, which had no such radical change, would show how regulatory reform could bring about positive change.

They concluded that trends in England and Wales suggested regulatory reforms were necessary but not enough on their own to meet latent legal demand.

They assessed that the UK’s legal services market was less than a fifth of the size of the US’s. However, in both countries, the PeopleLaw sector brought in only a quarter or so of law firm turnover overall compared to BigLaw.

With the tasks in PeopleLaw generally more routine in nature, there was more potential for value to be created by tech, they said.

But adoption was currently more limited in this sector, making it more difficult to scale up legal tech in order to substitute human lawyers – the most expensive component in providing legal services.

Factors exacerbating the situation included the smaller size of the firms and the fact that PeopleLaw clients tended to need more face-to-face time with a human.

The authors said: “For PeopleLaw, the cost of having a human lawyer remain in the loop may be prohibitive. This suggests that at least part of the unmet legal needs may be beyond the current technical possibility frontier.”

Chatbots and machine learning could only help up to a point, they felt. The gap between ordinary understanding and specialised legal terminology could not currently be handled by natural language processing, meaning “the extent to which legal tech systems can substitute completely for human lawyers” was limited.

The authors were also doubtful AI would help to bridge this gap anytime soon and imagined a future “in which PeopleLaw will be left behind in the [AI] revolution”, although it was also possible that tech providers could use machine learning algorithms to benefit firms both large and small.

They concluded that, while alternative business structures had given many small firms the ability to raise investment capital, this tended not to result in much greater tech spending leading to improved levels of access to justice.

Yet US firms had managed to raise and invest far more external capital in tech, suggesting “the impact of the UK’s deregulation has been less than transformative”.

Ultimately, although technology and big data held great promise for transforming both big and small firm sectors by lowering costs, the paper said, “to make PeopleLaw thrive relative to BigLaw, the use of legal tech is necessary but not sufficient”.

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