Competition watchdog to investigate operation of legal services market

The Competition and Markets Authority (CMA) is to hold a market study that it says will examine “long-standing concerns about the affordability of legal services and standards of service”.

The CMA said concerns had also been raised about the complexity of the current regulatory framework for legal services.

The watchdog said it intended to look in particular at:

• whether customers could drive effective competition by making informed purchasing decisions;
• whether customers were adequately protected from potential harm or could obtain satisfactory redress if legal services went wrong; and
• how regulation and the regulatory framework impacted on competition for the supply of legal services.

Rachel Merelie, Senior Director at the CMA, said: “Whether it’s buying a property, resolving disputes or getting expert advice on financial and employment matters, it’s vitally important that consumers and small businesses can access the legal advice and representation they need. They also need to secure value for money and quality when purchasing these services. These are all areas that can have a major impact - both personally and financially - on the lives of individuals and on the success of small businesses.

“We would be concerned if customers are not getting a good deal, either because they do not know what to expect when purchasing a legal service, or because they are not seeking appropriate legal support in the first place.

“Not being equipped with the necessary knowledge stops customers exercising choice and prevents competition working effectively. We want to see if some customers end up paying more than they expected or receive a poor service. We also think there may be questions over the redress available if this does happen.”

The CMA said it wanted to hear from all those involved about the issues they experienced in using legal services and, in due course, how to tackle any problems it might identify.

The watchdog plans to carry out surveys of consumers and small businesses and also plans to conduct a number of case studies into specific legal service areas.

The impact of alternative business structures, which now number 600, will be considered as well.

The CMA added that it would work closely with government departments, regulatory and other representative bodies as well as consumer groups.

The watchdog is required to announce within six months whether it intends to refer the market for a more in-depth (‘phase 2’) investigation and must publish its report within 12 months, setting out its findings and the actions (if any) it proposes to take. The CMA expects to produce an interim report in July this year, with a final report following in December.

The Treasury and the Department for Business, Innovation and Skills announced last November that they plan to hold a consultation by this spring on removing barriers to entry for alternative business models in legal services, and on making legal service regulators independent from their representative bodies.

The CMA’s announcement was welcomed by the Solicitors Regulation Authority and the Legal Services Board.

The SRA’s CEO, Paul Philip, said: "It is crucial that the legal services market works in the public interest and serves all consumers. We welcome all and any efforts to promote that goal and that is why we are pleased the CMA is conducting this study and will offer our help as they do so.



“Over the past two years, our programme of regulatory reform has prioritised opening up the market and encouraging growth and innovation. We believe that will benefit both the public and the profession.

"The Government's proposals to make legal service regulators independent from their representative bodies would also strengthen the market and help make regulation more efficient and effective. Making this change would also cut costs, which will benefit solicitors and law firms and their clients, as well as boosting public confidence."

Neil Buckley, chief executive of the Legal Services Board, said: "A major problem in legal services is that a large proportion of the population and small businesses cannot afford such critical services.

“The functioning of the legal services market has without doubt improved since the introduction of the Legal Services Act but it still has a long way to go before it can be said that it is an effective market.

“This study offers a clear opportunity to assess where the legal services market stands today. It offers an opening to understand better what should be done to unlock growth, increase productivity and address the significant unmet need that exits in this particularly important segment of the UK's economy.”