An independent body should regulate legal services in Scotland, the Competition & Markets Authority has concluded following a research project to examine competition and regulation in the sector.
Its report also recommends a series of measures to improve the information made available to the public and make it easier for them to shop around when seeking advice on, for example, a house purchase or divorce.
The CMA believes there are indications that the Scottish legal services sector may not currently be delivering good outcomes for people. It states that consumer complaints are increasing; high street solicitors are facing challenging market conditions; and regulation in Scotland has not adequately responded to new market pressures.
It further criticises the slow pace of regulatory reform and the lifting of restrictions in the legal services sector.
Although the Law Society of Scotland has just introduced guidance for legal firms on price transparency, the CMA considers that legal providers "can and should do a better job of informing people on what the costs will be".
Its recommendations include:
- a review by the Law Society of Scotland of the impact of existing price and service transparency guidance, including whether mandatory rules could strengthen the information available;
- implementation by the Society and the Scottish Government of the alternative business structures scheme as permitted by the 2010 legislation, with the Government removing certain restrictive requirements of the scheme, which it says will help law firms to be more flexible and innovative so that they can better adapt to consumer needs;
- the introduction of an independent body to regulate the legal profession, setting standards and handling complaints, as recommended in the report by Esther Roberton. "Separating regulation from representation will increase trust in this sector and result in better regulation", the CMA states.
While encouraging the Scottish Government to implement the recommendations promptly, the CMA recognises the challenges of the current environment and the impact of the COVID-19 outbreak.
Chief executive Andrea Coscelli said: "It is important that people in Scotland have access to high-quality and good value legal services. In addition to increasing transparency of information, our recommendations are intended to introduce greater liberalisation that could foster growth and innovation in the delivery of legal services which would help the sector grow.
"You might not need a lawyer very often, but when you do it will often be at a crucial point in your life, so addressing regulatory and competition shortcomings will make a real difference."
Responding to the report, John Mulholland, President of the Law Society of Scotland commented: "Our current number one priority is to support solicitors and their clients deal with the unprecedented challenge of coronavirus.
"However, we appreciate the CMA has published a detailed report and we will want to consider the content carefully over the coming months. Some of the recommendations around price transparency involve actions which we are already committed to taking forward at the appropriate time. We also agree that pace is needed around new introducing new alternative business structures. This may be one way to help firms access vital capital following the current crisis.
"On the issue of wider reform, the CMA started its work with a clear policy position in favour of creating a new regulatory body. So it is no surprise to see it reiterating that position. However, at this of all times, we must avoid creating complicated new structures which add little benefit and only serve to build in extra costs for legal firms. All this would do is increase prices for consumers and undermine the competitiveness of the Scottish legal services market."
Roddy Dunlop QC, Vice Dean of the Faculty of Advocates, added: "The Faculty notes the CMA’s paper and its suggestions which will require time to examine in detail.
"We are committed to playing a full and constructive part as the Scottish Government takes forward its consideration of reforms of Scotland’s legal services."
The Scottish Legal Complaints Commission "strongly welcomed" the report. Chief executive Neil Stevenson said: "Many of the themes outlined in the CMA’s report, such as publishing regulatory and other data to help consumers compare lawyers, echo calls we have made in our papers on reform.
"We also agree that separating regulation from representation will increase trust in this sector and result in better regulation. From our feedback from consumers, we know there is the perception of conflict of interest, which undermines confidence in the system."