Employed solicitors may soon be able to act for third parties if the findings of the long-awaited report by the Office of Fair Trading (OFT) are implemented.
The high profile report ‘Competition in the Professions’ is calling for a relaxation of the rules preventing employed solicitors acting for people other than their employers.
Under present Law Society rules, solicitors employed by non-solicitors are prohibited from acting for any other person.
But the OFT report found that the restriction reduced the number of potential competitors in the markets.
If adopted, it could allow competition from those suitably qualified working in different business structures, in particular in-house lawyers working at legal expense insurers.
It was a submission from motoring organisation the RAC, rather than the expense insurers, that raised this restriction as a potential problem for competition.
Eddie Ryan, director of RAC Legal Services, said the organisation was “keen, on its customers’ behalf, to make the service industry as accessible as possible” and that it would continue to press for a more flexible and customer-friendly system.
The report calls for wide-ranging changes to the profession. It was published following consultation with a range of professional bodies, industry representatives, leading firms and consumer groups.
The OFT report: key findings
- The Competition Act 1998 should apply to the professions and schedule 4 entitlement to exclusion provisions should be removed.
- The distinction between QCs and junior barristers has significant effects on competition. The review questions the operation of the system as a quality mark, and its value to customers.
- Restrictions on multi-disciplinary partnerships should be removed.
- Solicitors employed by non-solicitors should be allowed to act for people other than their employers.
- Restrictions on payments by solicitors to third parties for work that that they have referred hamper the development of online marketplaces that would bring clients and solicitors together.
- Privilege should be reduced in scope or extended to others to remove the distortion of competition that favours the lawyer.
- Restrictions on barristers having direct access to clients restricts ability to compete with each other and solicitors and requires customers to employ two types of lawyer where one might do.
- The report questions whether the Bar Council restriction on barristers forming partnerships is necessary or proportionate.
- Evidence of increased numbers of solicitor-advocates competing to provide advocacy services remains limited. Further deregulation may be necessary.
- The Bar Council’s decision not to give independent barristers rights to conduct litigation prevents potential efficiencies and limits the number of lawyers who are able to conduct litigation.
- Guidance on fees issued by the Law Society, in particular relation to
probate, may be inhibiting or distorting price competition.
- Relaxation of the 50% rule that restricts statutory audit to those
practising in a firm where accountants hold the majority of voting rights. The rule might inhibit the formation of MDPs involving auditors.
