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In March, Chinese Premier Li Keqiang unveiled an “internet plus” strategy to use technology and internet-powered businesses to drive the country’s economic growth. China’s legal industry is stepping up.
Since 2012, more than two dozen of websites or mobile apps aimed at providing legal services have entered the Chinese market. Some of these ventures have been started by lawyers who formerly worked at big firms such as King & Wood Mallesons. Most of the sites provide one of two main functions: standardized documents generation and on-demand lawyer search.
In the first category, sites such as Lvgou.com and Zhiguoguo.com operate as online shops selling legal services to small business clients. Lvgou offers mostly products for company registration and contract drafting, with prices ranging from $48 to $1,600, while Zhiguoguo emphasizes intellectual property rights registration, patent listing and trademark application services at a cost of between $65 and $560.
Starting in 2013, another group of legal services sites emerged. They help prospective clients find lawyers—for free—based on a crowd-sourced review and rating system. Fadoushi.com, one such site, lists nearly all practicing lawyers in Beijing and Shanghai, each with a profile that includes their practice areas and user reviews, much as Yelp lists restaurants. (Lawyers can register with the website, but they are listed regardless of whether they do so.) For a particular piece of work, lawyers are encouraged to submit their prices—most of them do—so clients can compare and decide. Sites using this model also include litigation-focused yingle.com, which literally means “we won,” and Law Cloud, which operates in cooperation with Yingke Law Firm, one of China’s largest firms by head count.
Fadoushi was founded in 2013 by Xu Kaichen, who was previously a Shanghai partner at DLA Piper. Having advised on many venture capital investments, he was inspired to strike out on his own. To date, his venture has received more than $2 million in investment, including much from his former clients. “What we are doing will make the legal industry more transparent,” says Xu, who likes the Yelp analogy.
“We will soon launch our latest product, which is the win rate of each lawyer,” Xu says. He and his team came up with an algorithm that can analyze 1 million court decisions every minute—Chinese court decisions are relatively short, often only a few pages—and calculate the success rate of all lawyers involved. He admits that an attorney with an 80 percent win rate who handles relatively simple cases may not necessarily be a better lawyer than one with a 50 percent win rate in more complex litigation, but users will still want to know the information.
“Wouldn’t you want to know a doctor’s cure rate before going to see her?” he says.
A group of Yingke partners, including managing partner Mei Xiangrong, invested and help launched Law Cloud in Shanghai in 2013. In addition to Yingke lawyers, the site also lists lawyers practicing independently or at other smaller firms. At the moment, Mei says, there are at least 7,000 lawyers providing services through Law Cloud. The site also helped drive businesses to Yingke, he says.
“A lot of our lawyers receive most of their work through Law Cloud,” Mei says. In two years, Mei envisions about 50,000 lawyers working through the site.
Websites like Fadoushi and Law Cloud don’t charge users, but rather take a cut from the fees of the lawyers who register with the site once a transaction is complete. One problem with this business model is that, after the first assignment, clients may go directly to the lawyer without going through the site.
“If the work was bad, you lost the client; but if the work was good, the client went with the lawyer, you still lost her,” says Internet entrepreneur Chen Yifan, a former associate at King & Wood before the Chinese firm merged with Australia’s Mallesons in 2012. Like Xu, Chen focused his practice on venture capital work.
He came up with a different model with his venture, Fahai.com, which operates a website as well as a mobile app called Online Corporate Counsel. “The app is our primary product. It allows small companies to outsource their in-house legal team,” says Chen.
Instead of hiring an in-house counsel for $48,000 a year, a company can use Fahai’s Online Corporate Counsel for $8,000 a year. The app targets only small private businesses at their launch stage and includes a three-lawyer team providing legal services through the app 24/7. Clients that prefer having an in-house lawyer on the premises can pay $16,000 a year for a freelance lawyer to spend one day every two weeks at the company’s headquarters. Fahai lawyers take work from multiple companies; Fahai makes sure there are no conflicts and promises to keep all communications confidential.
Chen says that Fahai now has nearly 1,000 lawyers working as freelance in-house counsel. Some lawyers work full-time at Fahai, but most of them are independent practitioners working part-time. “This way we liberate lawyers,” says Chen. “We free them up from the traditional work routine. No more dealing with the boss. No more sitting in a cubicle all day. With a phone and a computer, they can work anywhere they want.”
In addition to Chen, Fahai lists at least five other ex-King & Wood lawyers as part of its offering. Others have previously worked at leading corporate firms such as Zhong Lun Law Firm, the former Jingtian (which merged with Gongcheng in 2000) and FenXun Partners.
“We don’t take a cut,” Chen says. “Lawyers get to keep whatever they make all to themselves.” To attract full-time lawyers, Fahai also offers bridge loans to newcomers to aid in their transition from firm life to freelancing. Lawyers who reach certain revenue targets receive rewards, though Chen did not specify the rewards.
Instead of taking a slice of fees, Chen is exploring other revenue sources. Fahai also offers standardized products such as contact drafting, and Chen says he is working with banks on products related to family trusts and with the Supreme People’s Procuratorate, the country’s top prosecutorial body, on automated arbitrations involving peer-to-peer loan defaults. The company has received a $6.5 million first-round investment from investors including Beijing King & Wood Foundation, which was set up by King & Wood in 2008 to support young entrepreneurs.
Many internet legal business entrepreneurs in China liken their ventures to Uber Technologies Inc. or Airbnb Inc.—matchmakers between service providers and customers. But so far, the impact these websites or apps has had on the Chinese legal industry is far from the turbulence that Uber has caused in the taxi business. Lawyers at corporate firms targeting multinational or large state-owned enterprises say they have hardly used or noticed these sites.
“We don’t know much about them, and right now we are not seeing any impact on us,” says Liu Hongchuan, a corporate partner at Beijing-based Broad & Bright. Most of his firm’s business still relies on word of mouth and referrals, Liu says: “We also do cold calls, but those are less likely to be successful because if we don’t have any connection with the company, it’s hard to build the trust.”
Those who have launched their own legal Internet businesses shrug off such resistance.
“Lawyers are in their nature anti-risk,” says Chen. “But risk is what the internet is all about.”
Email: azhang@alm.com.