CMA repeats call for regulatory reform

The UK’s competition regulator has called for “wholesale reform” of the Legal Services Act but said there have been positive developments on transparency.

The Competition and Markets Authority (CMA) reviewed changes made to the legal sector following its post-market review recommendations in 2016, and has just published its report which found “clear signs of progress”.

Its 2016 recommendations focused particularly on increased transparency by firms on price, service and quality; giving stronger protection to individuals using unauthorised providers; and longer-term review of the regulatory framework.

The CMA review revealed many more firms are now providing information on price, service, redress and regulatory status to help consumers shop around. 

However, it said “there is still work to do as there only appears to have been a limited impact on the intensity of competition between providers and on sector outcomes”. 

The super-regulator – the Legal Services Board (LSB) – should, the CMA said, work with other legal regulators to continue building on the reforms and address parts of its earlier recommendations that still require progression.

It singled out its recommendations around providing more information on quality and its call for a regulatory review of the Legal Services Act 2007.

It said the case for regulatory reform is still pressing, particularly given the signs of growth in the unregulated sector, such that “wholesale” reform of the Act is now necessary. 

Meanwhile, the CMA suggested reform could be delivered in stages in the shorter term and called on government and the LSB to agree to the actions it recommended.

These include that the Ministry of Justice (MoJ) establish a mandatory public register of unregulated providers who must provide appropriate redress.

The LSB should also review activities reserved to certain legal services providers to ensure such restrictions are necessary and proportionate, it said.

The CMA’s CEO Andrea Coscelli said it was positive to see the changes already made, “but more progress is needed”. 

He added: “We encourage the Ministry of Justice, the Legal Services Board and other legal services regulators to continue to work towards reform and to make sure the sector works well for consumers long into the future.”

The CMA’s call for regulatory review was backed by the Chartered Institute of Legal Executives (CILEx). Its chair, Professor Chris Bones, said: “Four years on from its original recommendation to review the regulation of legal services, we are not surprised that the CMA now sees a pressing need for one.”

He said the shortcomings apparent back then have not been adequately addressed; and the “rigidity of the current framework does not recognise large pockets of existing providers”.

Without further flexibility, he said it risks excluding also those novel technologies and solutions that lawtech can bring.

He added that some areas that require intervention in consumers’ interests can only be achieved by legislative reform.

He went on: “Any review should look beyond the Legal Services Act 2007 to include legislation that imposes illogical and outdated restrictions on the market. 

“These include a bar on CILEx lawyers certifying copies of a power attorney under the Powers of Attorney Act 1971 – despite being able to certify originals – and limitations on criminal advocacy work deriving from Courts and Legal Services Act 1990. 

“Both have direct adverse effects on consumer awareness and competition.”

“The CMA’s recommendations will help open [the sector] up to the large swathe of the population increasingly denied access to otherwise affordable and effective legal representation,” said Professor Bones.