More price disclosure needed to boost legal market competition, CMA reports
The reformed legal services market in England & Wales is still not enabling people to shop around effectively, a study by the Competition & Markets Authority (CMA) concluded today.
After a year-long study into the sector south of the border, the CMA's final report – which follows an interim report published in July – has concluded that competition in legal services for individual consumers and small businesses is not working well. In particular, there is not enough information available on price, quality and service to help those who need legal support choose the best option.
While the study focuses on England & Wales, recognising that Scotland and Northern Ireland are at different stages with regulatory reform, the CMA plans to use its findings to inform any future consideration of similar issues in these countries.
Criminal legal services have not been included because the issues the CMA has considered are less relevant to them.
Its report sets out a package of measures, challenging providers and regulators to help customers better navigate the market and get value for money. These measures, which would be overseen and regularly reported on by the Legal Services Board as umbrella regulator, include:
- A requirement on providers to display information on price, service, redress and regulatory status to help potential customers. This would include publishing pricing information for particular services online (only 17% of firms do so at present).
- A revamped Legal Choices website, as a starting point for customers needing help, information and guidance on how to navigate the market and purchase services.
- Facilitating the development of comparison sites and other intermediaries to allow customers to compare providers in one place by making available data already collected by regulators. At present only 22% of people compare the services on offer before appointing a lawyer.
- Encouraging legal service providers to engage with feedback and review platforms to ensure that customers can benefit from the experience of others before making their choice.
- Recommending that the Ministry of Justice looks at whether to extend protection from existing redress schemes to customers using "unauthorised" providers.
Considered the impact of legal services regulation on competition, the CMA found that whilst the current system is not a major barrier, it may not be sufficiently flexible to be sustainable in the long term. Consumers, it believes, may be avoiding unregulated providers even in situations where they might be of benefit.
As a result, it wants regulation to focus on activities and risks to consumers, with a shift away from regulation attaching solely to professional titles and bringing some activities of unregulated providers into regulation. Lawyers should be “less tightly regulated” than at present for lower-risk activities, “reducing the costs of regulation and encouraging different approaches and business models”.
The Ministry of Justice should review the current framework to make it more flexible and targeted at protecting consumers in areas where it is most needed.
Rachel Merelie, acting executive director for markets and mergers, commented: "Consumers who are equipped with the information they need to assess the services on offer and choose the best deal for them, will not just benefit personally but will also help drive competition, quality and innovation across the whole market. That means a better outcome for everyone and, importantly, fewer people will be discouraged from seeking the help they need."
The CMA has pledged to re-evaluate progress and the impact of the recommendations in three years’ time, and to intervene further if progress is not satisfactory. In July, the UK Government published a consultation on proposals for removing barriers to entry for alternative business models.
Welcoming the report, Legal Services Board chairman Sir Michael Pitt said: "This study was commissioned because of longstanding concerns that we have previously highlighted through our work about both the affordability and quality of legal services on offer. The conclusions it reaches align with our own which is that the legal services is not working well enough for consumers and small businesses and that the current regulatory framework is unsustainable in the long run."
He added: "The dual focus on market transparency and structural reform is essential. In particular we are pleased that there are recommendations to the Ministry of Justice for action on regulatory independence and the need for wider reform of the Legal Services Act. These are central elements of our own vision for the future of legal services regulation, as we set out earlier this year."