The Competition and Markets Authority (CMA) has criticised competition in legal services for individual and small business consumers, saying that it is not working “as well as it might”.
In its interim report into legal services, the CMA has found that upfront information on price and quality is often not available to consumers in order to allow them to compare offers and choose the one that most suits their needs.
It has also found that it is difficult for providers to signal quality in this sector and that there are a lack of digital comparison tools to make comparisons easier for consumers.
As a result, only a minority of individual clients (22%, according to a CMA survey) compare providers before choosing one. The CMA said that this may reduce the incentives for providers of legal services to compete.
“This lack of competition may mean some providers are able to charge higher prices when substantially cheaper prices are available for comparable services,” it said.
The CMA has also considered whether legal services regulation has an adverse effect on competition. Its provisional view is that this regulation does not create significant barriers to entry or distort competition between regulated and unregulated providers of legal services, but that it does impose significant costs on providers that in some cases may be excessive relative to the benefits in consumer protection.
Senior director for the legal services market study at the CMA, Rachel Merelie, said: “Consumers in this market are often not equipped with the right information before they make important purchasing decisions – which often come at critical points in their lives.”
“Whether it’s buying a property, resolving disputes or getting expert advice on financial and employment matters, individual and small business consumers deserve to get good value when they seek the legal advice and representation they need.”
“Without greater transparency, individual and small business consumers find it difficult to compare and choose providers of legal services. For many of them this is an infrequent purchase and a lack of experience or prior knowledge makes it very challenging to assess what represents good value.
As a result, they tend to rely on recommendations from family or friends in choosing providers without checking for themselves what the market has to offer. This is unlikely to drive effective competition.”
Merelie said that the CMA’s focus would now be on how it can drive competition by improving the information that providers make available to consumers both before they buy and during the process “so that they aren’t hit with unexpected costs”.
“We will also look at measures to improve the existing independent information channels that are available for customers,” she said.
“We will work with government, regulators, representative bodies and consumer groups to look at practical ways we can help consumers for these services. This includes considering recommending that providers be required to publish price information in future.”