The Federation of Small Businesses (FSB) has recommended that legal services regulators be given sweeping powers to force providers to make public wide-ranging information on pricing and client feedback.
The not-for-profit organisation, which lobbies for the interests of SMEs, also advised that ‘unmet need’ among small businesses is addressed by boosting the information available on what problems might have legal remedies.
Responding to the Competition and Markets Authority’s (CMA) interim report, the FSB welcomed its focus on price transparency, but also urged a “holistic” approach to reform. In particular, it highlighted the need for the market to deal with a “knowledge gap” that it said prevents small businesses from meeting their legal needs simply because they do not understand when they have issues that have a legal remedy.
Without addressing “awareness gaps”, the FSB said, “the market will never improve sufficiently to make a significant dent in the large quantity of unfulfilled legal need that exists among small businesses”. Focusing on transparency and information would “bring improvements but no far-reaching ones”.
It said what small businesses needed help with understanding was: what is a legal issue; the best means of resolution; where they can find out relevant information about appropriate legal remedies; and how best to utilise advice and information in their own interests.
Also, legal services regulators should have the power to “require providers of legal services to provide up-front transparent pricing to potential customers”. The FSB added: “Since such information is in client care letters already, it should not be onerous for lawyers to provide to potential clients up front.
“Alternatively, the regulators should, as a backstop power, and at minimal additional cost and effort, be compelled to obtain from all lawyers their hourly billing rate with their annual regulatory return and require firms to provide similar information about services and related pricing.”
Further, regulators should be given a power to demand that legal services providers collect client feedback, which the regulator should publish “in some form”.
It recognised this measure would be “considered somewhat… intrusive and burdensome”, but in the long run: “The few pence per client feedback requested that it can cost to collect such feedback data is an insignificant cost relative to the much higher average cost per transaction to clients.
“Despite the initial additional costs, with this sort of data made public the long-term gains for clients, the legal services providers themselves and the market more generally should be significant.”
The FSB suggested that to help small businesses know which information sources can be trusted, data used by comparison sites could be quality-marked.
The organisation also argued that, even if it cut across other such studies, the CMA should widen the scope of its investigations to ensure a “co-ordinated and coherent reform agenda for the legal services sector, which flows from some clear evidence-based objectives”.
As well as the “knowledge gap”, issues such as a widened role for the Legal Ombudsman in covering small business disputes with legal service providers, and the functioning of the commercial ADR sector for smaller businesses, should also be addressed.
The FSB said: “[We] consider that without thoroughly looking into these other aspects of the whole legal services picture, the market will never improve sufficiently to make a significant dent in the large quantity of unfulfilled legal need that exists among small businesses.”