Law Society's mandatory CQS training anti-competitive, tribunal hears

A leading anti-money laundering training provider has accused the Law Society of abusing its dominant position by tying future training needs under its successful conveyancing quality scheme into ongoing accreditation.

Solicitor Bernard George, who runs Socrates Training Limited, says Chancery Lane’s requirement that CQS firms should buy training from the Law Society has restricted his and other providers’ businesses from access to the training market. This, he argued before the Competition Appeal Tribunal last month, amounted to unlawful anti-competitive behaviour.

‘For conveyancers, CQS is not only dominant, it’s the only standard in the market. If you want a quality scheme to credit you as a competent conveyancing firm, there is only one product,’ George told Solicitors Journal. ‘Virtually all conveyancing firms have signed up to it. That puts the Law Society in a dominant position, and if you’re a dominant operator, you cannot tie another, unrelated service as a way of leveraging your dominance.’

The Law Society introduced its conveyancing quality scheme in 2011 in a bid to help smaller firms remain on lenders’ panels in the wake of the 2007/08 financial crisis. Speaking to Solicitors Journal when he started proceedings in June, George said the purpose of CQS should be ‘to ensure accredited lawyers are competent, not to sell training’.

Court documents show that Socrates’ turns over about £750,000 in revenue a year, making it one of the main providers of AML training. George said he started hearing from clients in 2015 that they would not renew their subscriptions with Socrates because of CQS requirements.

‘The Law Society had realised law firms were spending a fair bit of money on AML and that it could channel some of that revenue into its coffers,’ George commented. The potential significance of CQS training was further highlighted in the course of the tribunal hearing where it was revealed that this accounted for about 90 per cent of the society’s CPD training income in 2015.

‘CQS training is premised on the idea that the Law Society can force 3,000 or so firms to buy training from themselves on a monopoly basis,’ George continued. ‘If we can establish that this is illegal, then we’ll be entitled to damages and so will other training providers.’

The outcome of the case would likely affect how Chancery Lane envisages running similar accreditation schemes. The wills and inheritance quality scheme (WIQS), the only other scheme launched along similar lines, has been less popular. In parts this is because WIQS is driven not by the intention to assist with access to lender panels but to raise standards in a sector where non-regulated providers are gaining ground.

In written evidence before the tribunal, Ian Hamilton, a partner at three-partner firm Hamilton Davies, said his firm joined the CQS ‘because some major mortgage lenders had made CQS membership a pre-condition of being on their panel’. He went on: ‘It is not likely that I would have bought AML mortgage fraud or other training from the Law Society if we had not been required to do so within the CQS rules.’

Appearing for Socrates, Philip Woolfe argued that the issue was not simply a matter of access to the training market but that buyers’ behaviour was affected and that competition no longer took place on the merits. Solicitors could still choose to buy AML training that better fitted their needs outside the Law Society but as a result of the tie, he said, they were ‘unlikely to do so, whereas in a free and unrestricted market without the tie, they may well have done’.

Woolfe relied on documents compiled by both sides to suggest that, as the proportion of CQS firms continued to rise, it fell as a proportion of Socrates’ subscribers, and that the total number of Socrates subscribers had fallen as well.

The Monckton Chambers’ barrister said that, had the Law Society not reserved CQS training to itself, Socrates could have competed effectively to meet the demand, but it had been denied the chance to do so, which ‘is an anti-competitive effect’.

‘We see a rising trend where the CQS population of the country grows, but then while the CQS population of the country carries on rising, it falls off for Socrates. We say that is, in fact, probably the best evidence about it there,’ he concluded.

A Law Society spokesperson said: ‘This issue has been placed before the Competition Appeals Tribunal – we will comment in full once we have heard their ruling.’

The hearing took place over four days between 8 and 11 November. Judgment has been reserved and is expected before Christmas.

Jean-Yves Gilg is editor-in-chief of Solicitors Journal

jean-yves.gilg@solicitorsjournal.co.uk | @jeanyvesgilg