SRA Consultation on Price and other Information

In a recent Consultation document the SRA are proposing to:

  • require firms to publish their price for services (limited initially to a select number of legal services)
  • require firms to publish a description of the services they offer – in the same areas we will ask firms to publish price information
  • require firms to make information on our regulatory protections available – this includes introducing a digital badge that verifies that a firm is regulated by us
  • publish the data we already collect on first-tier complaints made against firms we regulate and their areas of practice
  • build a digital register that holds our key regulatory data about solicitors and firms we regulate in one place and make this available to the public
  • require solicitors working in non-Legal Services Act regulated firms to inform clients that they are not subject to the SRA requirements for compulsory professional indemnity insurance.

Here is my response, in case it is of interest. My basic argument is that in seeking to make the market for regulated legal services more competitive, it may increase the costs of regulation – for firms and for the SRA. The regulatory case for doing so is only made out if behaviour (of clients and firms) will change. Some experimentation in the area is worthwhile but I think the SRA should assess carefully the impact of its experiments and be prepared to track-back if they are not shown to impact significantly on behaviour of suppliers and users of legal services.

I agree that consumers do not receive enough information available on price, quality and service to help those who need legal support choose and I agree that this may inhibit access to justice: where consumers assume that legal service costs are too high when there are, in fact, affordable services; where competition might reduce costs sufficiently for those at the margin; or where the apparent unpredictability of costs puts potential clients off (where in fact such costs could be predicted or fixed).

I also think this risk can be overstated: access to justice problems might more often be linked to solutions actually not being affordable (however transparently they are priced) or client’s not perceiving that there are useful solutions to legal problems. As Kritzer notes, access to lawyers is not predominantly influenced by cost barriers but the nature of the client’s problem.[1] I am aware too of some legal service providers who have noticed a price sensitivity around fixed fees (where reducing their fee marginally below a natural threshold increases customer volumes). A sensible starting point for thinking about the impact of competition on access to justice is that it would likely have a modest impact on the numbers of people helped– unless such competition led to a radically different, and cheaper, model of service.

For now, such radically different models have not really reached proof of concept stage. Nor, if one is to be realistic, is the creation of more radically cheaper models inhibited by the absence of price competition in the regulated sector of the legal services market. This is for two reasons: one is that such models are quite likely to arise in the unregulated market and the second is that if – as I believe to be the case – clients want transparent prices, these new providers will offer them forcefully and first. It will be a marketing advantage they use in their favour for as long as the legal profession lags behind on this issue.

I note too some modest signs that the market may be correcting itself. There is an increase in consumers shopping around from 19 to 27 percent reported in your study over a seven year period, it is a modest increase from a low base. The competitiveness of the market is growing, albeit slowly. On quality and choice, research on consumers generally suggests they assume a fairly uniform level of basic competence amongst qualified practitioners, but also take some account of specialisation. I know from my own informal research I have done with students, that specialisation is attributed haphazardly on the basis of a wide range of not always reliable information (website testimonials; size of firm; self-proclamation by practitioners). I do not see these proposals improving on that significantly. I understand the importance, and limitation, of personal referral as a basis of consumer choice and the desirability of more active choice.

I also understand the argument that, “clear information on regulatory protections should encourage small businesses and other consumers to approach the firms that are regulated legal services providers to resolve legal problems.” Given that consumers often assume that unregulated providers have such protections there is a theoretical case that advertising protections in the regulated sector may bolster their businesses because consumers become aware of the need for the legal equivalent of ATOL protection. I have seen no empirical evidence to support that theoretical view in legal services: that is evidence that such marketing works. Although Claims Management Companies use the fact of their regulation as a marketing tactic, I do not know if it actually helps them garner business.

I note that your plans for mitigating the challenges of your proposals do not include any in-depth assessment of whether they have an impact on consumer behaviour, beyond the suggestion you will ‘gauge the impact’. I would be expecting a robust plan to examine behavioural change and whether that change is negative. The FCA did a large amount of work on information based remedies in advice work and found, if memory serves, weak or non-existent behaviour change. There is a substantial risk of regulating here to no purpose. What is the evidence that digital badges, for example, will have any effect?

Similarly, your assessment of the impact of price transparency rules is whether firms adopt them, not how it impacts on consumer behaviour. The latter is more important than the former (although both are important). It would also be important to monitor impacts on price: there is the possibility that in moving towards fixed prices market prices increase – either because firms price in a margin for risks on the swings and roundabouts of fixed fees or because consumers opt for higher prices as a signal, spurious or otherwise, of quality. The latter seems to me to be a substantial possibility as there is an absence of good information on quality of providers and consumers will naturally see something of a quality signal in price.

Price transparency is laudable in principle but difficult in practice. I am not convinced you can successfully regulate for it. I think you should experiment but with caution. The information in Annex 2 varies considerably from case type to case type. Where you are confident of specifying it seems reasonably clear the market is already responding (albeit not as transparently as one would hope). Intervention here may speed things along: towards conveyancers having a standard online quote tool perhaps, where they have the website capability. This may favour larger, potentially more expensive providers – another reason why it is important to monitor price movements during and beyond the implementation of any reform. There are some other problems with price transparency:

  • I wonder if the accuracy of the price information be checked? What level of exceptions to the rule will be permitted?
  • The complexity of information that might be recorded (such as varied pricing models, and exceptions to fixed fees) may encourage the kind of information overload and unhelpful drafting which was associated with Client Care letters when they were first introduced by the Law Society.
  • Research on CFAs dating back to their introduction (Yarrow and Abrams) serves as a reminder that information can be as confusing as it is helpful. The SRA needs to tread very gently in requiring overly complex information – and should lead work, with consumer groups and others, on how best to explain standard features of – for example, CFAs and/or evaluating existing toolkits. Again the questions you should be asking are user-focused – do they inform? Do they change behaviour?

The proposal to provide indicative timelines on services is interesting. This is something which one suspects will confuse rather than aid clients; is not something which research suggests, as far as I am aware, generally informs their purchasing decisions. Indicative timelines are likely to be highly hedged by exceptions. I struggle to see the case for regulating to require them. It seems disproportionate and unlikely to achieve valuable gains for the consumer. It is the kind of micro-regulation which the SRA has sought to distance itself from too.

I am broadly supportive of the introduction of required and digital logos. The impact of the compensation fund logo on consumer understanding and behaviour might benefit from evaluation if it imposes significant costs on firms or the SRA itself.

I support the requirements to publish information on how to make first tier and LeO complaints. This is important information for consumers and the website is the obvious place to require it.

It would be interesting to explore the impact of publishing sanction information against individual lawyers in more depth than this paper does. How does it impact consumer behaviour? How does it impact career trajectories? Is there any research on this? It may also impact on the way SRA investigations are dealt with (are allegations fought harder, and/or does the ‘shaming’ element of publication impact on solicitor behaviour). Serious sanctions short of suspension or striking off may be increasingly likely to blight careers the more visible this information is; even though the regulator (or SDT) decision with regard to that case may not have that intention at all. Equally, it is hard to resist the idea that there is a public interest in being transparent about these issues and a three year sunset provision on entries short of strike-off or indefinite suspension provides some protection against this. A more proportionate approach might be to require firm level data be published (weighted in some way against size of firm) but individual data be more limited.

In relation to complaints data, it would be interesting to see evidence on how firms report complaints vs expressions of dissatisfaction. Evidence on learning organisations suggests those that more assiduously collect information on service failures (which might include complaints) are more likely to improve. Through publishing data on complaints there is a risk the SRA will stifle this kind of reporting (where it happens) and encourage firms to manage cases as expressions of dissatisfaction rather than complaints. I would expect significant gaming of the complaints/dissatisfaction boundary by some firms. I do not see in the proposals a serious attempt to grapple with this problem or evaluate the size of it (although you do acknowledge it). Good firms that play by the rules, take complaint seriously, and so on will be penalised by information publicised by the SRA. Without a stronger case that complaints levels, as mandatorily reported, link to service quality I think I would be cautious here.

The proposal to require solicitors working in non-LSA regulated firms to inform clients of the absence of the requirement to hold compulsory PII or the absence of Compensation Fund Protection seems to me unlikely to have much impact on consumers or their behaviour. Such disclaimers are likely to be given in ways which are not taken in by clients if they are understood at all. I do not see significant harm here though in requiring such solicitors to do this and it may be that consumers become sufficiently aware of the benefits of PII and Compensation Fun protection through the logo schemes and consumer sites.

This latter point is an interesting indication of some of the broader problems with these proposals. In seeking to make the market for regulated legal services more competitive, it may increase the costs of regulation. The regulatory case for doing so is only made out if behaviour will change. Some experimentation in the area is worthwhile but I think the SRA should be prepared assess carefully the impact of its experiments and be prepared to track-back if they are not shown to impact significantly on behaviour of suppliers and users of legal services.

[1] Herbert M Kritzer, ‘To Lawyer or Not to Lawyer: Is That the Question?’ (2008) 5 Journal of Empirical Legal Studies 875.

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About Richard Moorhead

Director of the Centre for Ethics and Law and Professor of Law and Professional Ethics at the Faculty of Laws, University College London with an interest in teaching and research on the legal ethics, the professions, legal aid, access to justice and the courts.
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