What India can learn from the UK Competition Authority’s report on legal services

Competition and Markets Authority

Twelve months after initiating a study on legal services in England and Wales, the Competition and Markets Authority has come out with an extensive report [pdf] on competition in this sector. The 500-page report has identified several lapses in the manner in which legal services are delivered, some of which hold true for India as well.

In particular, the report states that there is,

not enough information available on price, quality and service to help those who need legal support choose the best option”.

The report has recommended, among other things, a requirement on providers to display information on price, service, redress and regulatory status for customers; facilitating the development of comparison sites and other intermediaries to allow customers to compare providers; and encouraging legal service providers to engage with feedback and review platforms.

Sounds familiar?

Of course, there are more than a few differences between the regulatory regimes in the two countries.

For instance:

 
Criteria India England & Wales
Regulator The apex Bar Council of India, and several State Bars. The entry into the legal profession is by the means of an AIBE (which has by itself been a subject of litigation) The Legal Services Board, which in turn regulates several self-regulating organisations such as Solicitors Regulation Authority (SRA), Law Society and Institute of Legal Executives. Each of these have their own code of conduct, and barriers to entry.
Types of practitioners •   Advocates

•   Seniors advocates

•   Authorised persons (can carry out certain reserved activities, and all other legal activities),

•   Licensed bodies (can carry out certain reserved activities) and

•   Unauthorised persons/firms (can carry out unreserved legal activities)

Interested parties Only lawyers Lawyers as well as non-lawyers in the form of Alternate Business Structure, wherein non-lawyers can have ownership as well.

The Bar Council of India is a legally recognised self-regulatory organisation (SRO) that is the only national-level body entrusted with establishing, and enforcing, codes of conduct for lawyers.

The report notes,

We believe that a key principle of the regulatory structure is that it should ensure full independence of the regulator from the providers it regulates, as well as from government

As it stands today, the BCI much like any other SRO has badly designed incentives towards protecting its members instead of the consumers. To give you an example, the Bar Council of Maharashtra & Goa receives around 250 complaints against its member lawyers every year. However, precious little has been done to tackle these complaints.

On the other hand, the UK has multiple SROs for legal professionals, differentiated by the quality of their codes of conduct, their entry barriers, and consequently standards of service.

The government objective of consumer protection is therefore enhanced by promoting a competitive field of SROs as opposed to the current Indian system where SROs are legally recognised monopolies.

The Report recognises certain issues which have an adverse impact in the competition in the legal services industry.

  • Information asymmetry

In simplest terms, this is a situation wherein one party to a transaction possesses significantly better information than the other- the consumer of the service is at the mercy of service provider, due to lack of domain knowledge.

Individual consumers and small businesses often lack the skill to judge how good or bad the service provided to them by lawyers is, just like how one cannot truly judge the quality of service provided by a doctor to a patient till the time something goes wrong.

  • No transparency in pricing

Often seen as a ‘barrier to engagement’, this diminishes the consumer’s ability to effectively engage with a law firm.

There is no clarity on the amount that may be charged by lawyers/ law firms for a particular service. This holds true for litigation as well as non-litigation services. Of course, many matters cannot have fixed price, because each case is unique. But there also are some services which can have a fixed sum attached to it, to drive competency in the market.

The Report recognises that stakeholders have agreed that move towards fixed pricing in recent years, particularly in more commoditises services such as wills and conveyancing, has been positive.

With legal aggregation websites such as Vakilseach, though, there is a move towards fixed pricing for commoditised services such as, incorporation of a company, tax registrations, trademark registrations etc.

In the Indian context however, it could be argued that display of such information by lawyers/ law firms would amount to violation of Rules 36 of the BCI Rules.

  • Lack of innovation

The legal profession is traditionally known for, being stable rather than innovative. Limiting the scope of innovation is another factor which thwarts competition in the sector.

The introduction of ‘Alternative Business Structure’ in the UK Legal Services Act, 2007 has been seen has being helpful in this regard. This allows non-lawyers to have interest in legal entities, most of which are registered with the SRA. So far, this law has been mainly used by existing law firms to bring in non-lawyers at senior positions.

However, it will predictably pave the way for innovative business models to enter the sector and that this would drive innovation.

  • Corporate Structure

While in England, law firms can be of two types i.e. recognised body (managed by lawyers) and licensed bodies (may be managed by non-lawyers as well, such as ABS), in India, law firms are of just the one type.

The law firms in England are required to be registered with the SRA, while in India no registration of a law firm is (yet) compulsory with the BCI. As a result, there is no central repository of law firms registered with the BCI, let alone the provision of a feedback mechanism for the quality of services provided by such lawyers. A feedback platform for the quality of services is desirable.

  • Deficiency in services

Furthermore, litigants in India are mostly rendered remediless when encountered with a faulty service by a lawyer. A Supreme Court ruling in 2009, stayed a NCDRC order according to which a lawyer could be held liable for ‘deficiency of service’ under the Consumer Protection Act, 1986.

The appeal was, of course, filed by the Bar Association which, as stated earlier, is designed to protect the interest of its members and not the consumer. As the precedents stand today, anyone being defrauded by a lawyer or having received ‘wrong legal advice’ has a very little he/she can do.

In a rare case, however, the additional Pune District Consumer Disputes Redressal Forum directed a lawyer to pay Rs 38,500 to an architect, for representing him in a property dispute between 2003 and 2004 and taking legal fees. The lawyer did not attend court dates and kept the client in the dark, because of which, the architect lost the case and had to vacate the property.

Conclusion

Towards the end of the report, the CMA has asked the frontline regulators to publish action plan by 30th June 2017 and said that another review will be conducted in three years time. Given that the consumers of legal services in India are in greater need of this transparency that the report speaks of, the question is when will we begin this process.

(Read the CMA’s report below)

legal-services-market-study-final-report