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Scottish legal sector ‘may not be providing good outcomes for consumers’, Competition and Markets Authority says

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Scottish legal sector ‘may not be providing good outcomes for consumers’, Competition and Markets Authority says

Lawyers in Scotland “may not be providing good outcomes for consumers”, the Competition and Markets Authority (CMA) has said, following research into the Scottish legal services sector.

A report by the CMA notes that complaints about legal services are increasing, while it also says there is a lack of competition and transparency over prices.

CMA research found that only six per cent of law firms provided pricing information on a website, while just 16 per cent of those that had a website refer to third-party ratings.

This is a barrier to consumers shopping around and a disincentive for legal firms to “compete vigorously” with each other, the CMA said.

Although some legal services may be difficult to price in advance because it will depend on the complexity of the case, the CMA found large differences in fees for standard items, with prices, for example, varying from £100 to £200 for a will or £300 to £925 for an undefended divorce.

Currently the Law Society of Scotland carries out regulation and representation for solicitors and the Faculty of Advocates carries out both functions for advocates.

The CMA recommended separating these regulatory and representative membership roles between different bodies because of a “lack of transparency” over regulation and “conflicts” between representative and regulatory roles.

This follows the 2018 review of the legal services sector in Scotland by Esther Roberton, which recommended creating a single public body, independent of both government and the legal profession, to regulate legal services.

The CMA also called for changes to the current regulatory framework around the ownership of law firms by solicitors.

Although Scotland has had the power to introduce alternative business structures (ABS) that differ from that traditional model since 2010, this has not yet been enacted.

The CMA said this is seen as “one of the key issues hampering entry and innovation”.

Andrea Coscelli, CEO of the CMA, said: “It is important that people in Scotland have access to high-quality and good value legal services.

“In addition to increasing transparency of information, our recommendations are intended to introduce greater liberalisation that could foster growth and innovation in the delivery of legal services which would help the sector grow.

“You might not need a lawyer very often but when you do it will often be at a crucial point in your life, so addressing regulatory and competition shortcomings will make a real difference.”

The Scottish Legal Complaints Commission (SLCC), which handles unresolved consumer disputes with lawyers in Scotland, welcomed the CMA report and said it was “an important contribution to the debate on the reform of legal services regulation”.

SLCC chief executive Neil Stevenson commented: “Four years ago the SLCC published a vision for reform based on the ‘better regulation’ agenda and consumer principles.

“Many of the themes outlined in the CMA’s report, such as publishing regulatory and other data to help consumers compare lawyers, echo calls we have made in our papers on reform.

“We also agree that separating regulation from representation will increase trust in this sector and result in better regulation.

“From our feedback from consumers, we know there is the perception of conflict of interest, which undermines confidence in the system.

“Last year, the SLCC worked with YouGov to poll the public on various issues around legal regulation.

“The results demonstrated strong public views regarding the importance of a regulator being separate from representative bodies and limited public confidence that a body with both functions could deal with complaints about lawyers fairly.”

The report was also welcomed by consumer rights group Which?, which in 2007 launched a super-complaint with the Office of Fair Trading (OFT) over the limits of the current business structures.

Which? director of advocacy Caroline Normand said: “Which? has long called for independent regulation in the Scottish legal services market – so it is good that the CMA has reached the same conclusion. 

“Implementing this change could drive up standards by helping people overcome the barriers they face when choosing a lawyer, encouraging competition on price and service levels and ensuring complaints are handled fairly.

“The Scottish Government must now work closely with the competition regulator to make quick progress and ensure that consumers’ needs are a top priority in any new legal services regulation.”

The Law Society of Scotland said it would take time to consider the report but warned against creating “complicated new structures” that would add extra costs for law firms and increase prices for consumers.

President of the Law Society of Scotland John Mulholland said: “Our current number one priority is to support solicitors and their clients deal with the unprecedented challenge of coronavirus.

"However, we appreciate the CMA has published a detailed report and we will want to consider the content carefully over the coming months.

“Some of the recommendations around price transparency involve actions which we are already committed to taking forward at the appropriate time.

“We also agree that pace is needed around new introducing new alternative business structures.

“This may be one way to help firms access vital capital following the current crisis.

“On the issue of wider reform, the CMA started its work with a clear policy position in favour of creating a new regulatory body, so it is no surprise to see it reiterating that position.

“However, at this of all times, we must avoid creating complicated new structures which add little benefit and only serve to build in extra costs for legal firms.

“All this would do is increase prices for consumers and undermine the competitiveness of the Scottish legal services market.”

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