On value burgers and legal services

The recent Tesco burger scandal, finding that the ingredients might feature more Dobbin than Daisy has spawned some great internet humour. My favourite was about the joker who took an unused record store gift token to Tesco, trying to swap it for some burgers, contending that HMV stood for horse meat voucher. All very amusing but little to do with the legal world you might think; but there are significant parallels with the supply of professional services, which regulators and consumer organisations alike should consider.

The similarities stem from the basics of running a business. Talk of consumer dissatisfaction and regulatory compliance is easy if you are sitting in an ivory tower. My view is that the consumer is better or best served when those dispensing that advice understand more closely the mechanisms of day-to-day life on the shop floor and the realities and risks involved in making a profit (or loss).

This must include the basics of income and expenditure, the necessity for investment in people, their skills and expertise, the dead weight cost of regulatory compliance (ticking boxes might be very necessary but rarely add to the bottom line), the difference between running businesses with high and low fixed overheads, those whose stocks might be tins of beans and those whose sales are measured in the time and expertise of their employees. Ignorance of those factors or an unwillingness to understand the reality of them is more likely to lead to regulatory failure. What you will then end up with is the legal equivalent of value burgers.

Offering a product

Most consumers buying a value burger, if they really think about it, will understand the difference between one costing 5p and one bought for £1. However, they won't necessarily look at professional services in the same way.

There is an assumption among many consumers that the standards of legal advice and the 'product' on offer will be similar from one firm to another, that a will is still a will whether you buy it from firm X or firm Y. Solicitors know that is not the case (and the regulators should too). Both firms may make a will which is technically valid, both may even do what the client says they want, but the product may end up being very different, particularly where one has given proper advice to interpret the testator's wishes, the consequences of their personal and financial arrangements and the substitute gifts that might be given if the beneficiaries do not die in the order which the client expects, quite apart from any taxation implications.

The cost of providing the latter advice will be much more than the former. The client is likely to be ignorant of the difference between the two.

Why should a regulator understand these things you may ask? Is it not up to the profession to ensure that it abides by the high standards? If that were the case, of course, no regulation would be required, but in a truly competitive environment without any protection the consumer may be disadvantaged.

What financial necessity led to the contamination of the Tesco burger? I think simple economics. The basic overhead for production of the patty is a constant. The rent, rates, light and heat for the factory, the machinery and the wages of the staff are the same whether the end product is cheap or expensive. The only real variable will be in the ingredient, so the consequence of market forces pushing the price down is obvious for all to see.

In the conveyancing world volume or 'factory' conveyancers contend that they can keep overheads lower, the unit price can be reduced by shaving overheads here and there. Ironically, in order to feed the factory, referral fees are usually a necessity which undoes most if not all of the good work from which the consumer otherwise might benefit.

Supermarkets are of course familiar with referral fees as well. Suppliers may pay the shop for display prominence on the shelves at eye level. The fee is of course ultimately reflected in the cost to the consumer '“ it has to be paid by someone.

Protection and redress

What is different in our world? One feature is the level of protection and redress. I do not recall reading in the newspapers that any clients who had inadvertently found themselves munching on Neddy were able to refer to an ombudsman scheme and be awarded up to £50,000 in compensation. Were the supermarkets to carry such a scheme they might think twice about checking the supply chain more thoroughly.

Don't get me wrong, protection of the consumer is a very important part of our ethos and so it should be for the regulator but a proportionate approach is essential.
The Legal Services Act has endeavoured? to introduce greater competition in the?belief that this will lead to innovation. If you believe that a free market will drive that innovation then greater regulation is likely to stifle it unless it is proportionate.
If you want market forces to act then not everybody can be a winner '“ there will be losers as well, you simply can't have it both ways. Unless, of course, you want to remain ignorant of the practice which drives the choices which businesses make and don't mind ending up with something unexpected on your plate.