The watchdog also called on the government to review the whole regulatory regime and recommended a move away from regulation by title to a regime based on activity, as well as full independence for legal regulators.

The CMA said: “Overall, we have found that the legal services sector is not working well for individual consumers and small businesses. These consumers generally lack the experience and information they need to find their way around the legal services sector and to engage confidently with providers.

“Consumers find it hard to make informed choices because there is very little transparency about price, service and quality… This lack of transparency weakens competition between providers and means that some consumers do not obtain legal advice when they would benefit from it.”

It said competition was particularly relevant in the legal services sector “given the concerns about access to legal advice and a lack of low-cost alternatives for the provision of advice”.

Empowering consumers

Much of the activity we have seen since then has related to the consumer empowerment recommendations, aimed at providing the tools for people to shop around and compare providers. Most significant have been the provisions requiring greater transparency on price and service standards that CILEx Regulation, the Solicitors Regulation Authority (SRA) and the Council for Licensed Conveyancers have introduced.

The work is turning to what kinds of metric could be used to indicate to consumers the quality of providers

SRA research published last year found that 77% of consumers and small businesses believed the information now being published had proven useful in helping them to make ‘good choices’.

Transparency also changed perceptions of legal services: just 10% of consumers said that, after reviewing prices on law firm websites, they now thought instructing a solicitor was an unaffordable option, compared to more than half before the rules came in.

With these rules now relatively established, the work is turning to what kinds of metric could be used to indicate to consumers the quality of providers.

This is significantly more difficult. The number of complaints against a firm could be one, but generally we are talking small figures. And how do you compare a huge national firm that receives, say, 500 complaints a year with a sole practitioner who gets three?

The focus instead is on digital comparison tools (DCTs), such as review and comparison websites. The SRA research found that 13% of consumers and 22% of SMEs had used them when looking for a lawyer, while the annual tracker survey run by the Legal Services Consumer Panel recorded last summer that the proportion of consumers shopping around has reached 30%, the highest level to date.

Law firms are generally wary of DCTs – particularly out of fear of negative reviews – and in February the same three regulators joined forces to begin a pilot scheme working with law firms and seven DCTs to test how they can best work together to improve the information available to consumers.

Focusing initially on conveyancing and employment law services, the aim is to encourage dialogue between firms, websites, the regulators and the public about how best to expand the use and comparison of quality indicators.

Other initiatives being investigated include a single digital register of all lawyers and giving the cross-regulator Legal Choices website a more prominent role in providing information to would-be clients.

Brexit comes first

Where there has been far less progress is on a review of the regulatory framework. It is believed that, back in 2016, the then Lord Chancellor, Michael Gove, was on the verge of announcing a review of the 2007 Act. But then the Brexit vote happened, David Cameron resigned and Mr Gove lost his job when Theresa May took over.

Since then, the government has made clear that such a review is not on its agenda – Brexit and then Covid have unsurprisingly been far greater priorities. It maintained this position despite the independent review of legal services regulation, published last June by Professor Stephen Mayson, which argued that all providers of legal services, whether legally qualified or not, should be registered and regulated by a single regulator.

He said it was time to move from regulating lawyers to regulating legal services, but to differing degrees depending on the risk to the public interest of the work. This meant a qualification should no longer be the sole route into becoming a regulated provider.

However, despite an enthusiastic response from some, including CILEX, it has not moved the Ministry of Justice into contemplating action.

Instead, the most likely route for change – albeit not as radical as Professor Mayson put forward – is the Legal Services Board (LSB), which is considering whether to pull the levers it already has in the 2007 Act, such as reviewing the current list of reserved legal activities and potentially recommending removing some of them and adding others.

Signs of progress

Last autumn, the CMA returned to the fray, to assess the progress made in the four years since its original report, no doubt well aware that lawyers need constant prodding if anything is going to happen.

The CMA identified “clear signs of progress” on transparency, with many more firms now providing information on price, service, redress and regulatory status to help consumers shop around.

Changes have had limited impact on the intensity of competition said CMA

“However, while the evidence suggests that some customers are taking advantage of the changes, there is still work to do as there only appears to have been a limited impact on the intensity of competition between providers and on sector outcomes,” it said.

The watchdog acknowledged that the new transparency rules have only been in place for two years and were likely to have a greater impact over time.

“However, to ensure they have the best chance of success, we also believe that it is important for the LSB and the regulatory bodies to continue to build on the reforms so far.”

In particular, more work was needed on providing information on the quality of legal services.

The CMA suggested too that the regulators move away from principles-based rules, saying that though they gave providers flexibility in how they provided price and service information to consumers, this made it more difficult for consumers to compare providers.

“Regulators should now aim to improve the clarity and comparability of information through better promotion of best practice, developing their approaches to monitoring and compliance and through refining the rules and guidance now in place.”

Other recommendations were that regulators should “drive improvements in product standardisation and pricing”, develop a single digital register of providers, and encourage DCTs to get more involved in the legal market.

Concerns about unregulated providers

The CMA was less happy with the lack of movement on regulation, saying the case for wholesale reform was even stronger than it was in 2016.

“This is because there are signs that the unauthorised sector has continued to grow through developments in lawtech and will continue to do so in the future, potentially accelerated by the trend towards greater remote service provision driven by the coronavirus pandemic.

“The increasing significance of the unauthorised sector exacerbates the issues arising from a regulatory framework that is aligned with professional titles rather than activities. The need to address this will become more urgent over time.”

The CMA said it was “broadly supportive” of Professor Mayson’s proposals: “In our view, the main question now is how to make progress towards the goal of a more risk-based regulatory framework. Our preferred approach would be for the MoJ to carry out a wholesale review in order to reform the [Legal Services Act 2007].”

In the meantime, it recommended three actions within the existing regime which would help “deliver reform in stages”.

One was an LSB review of the reserved legal activities, the second the creation of a mandatory public register of unauthorised providers for certain legal services and mandating that they offer redress options to consumers (likely to be access to the Legal Ombudsman). Last summer, the Ministry of Justice indicated that it was already considering this.

Third was greater independence of regulation from professional representation. The CMA noted that “significant improvements” have been made as a result of revised internal governance rules imposed by the LSB on bodies like CILEX and CILEX Regulation, but it called on the LSB to evaluate their impact to see whether further measures were required.

Existing providers unrecognised

Much of the CMA report will not have come as a surprise to the regulators, which have had a continuing dialogue with the CMA since 2016, as shown by the fact that progress is already being made on quality indicators and engaging with DCTs. And it is still relatively early days to judge the success of the measures that have been taken to date.

Indeed, the response to the CMA report was rather muted, with CILEX the most enthusiastic supporter of the call for regulatory reform. Chair Professor Chris Bones said he was not surprised that the CMA saw a pressing need for it.

“The shortcomings that were apparent then have not been adequately addressed and we agree that Professor Stephen Mayson’s report earlier this year provides a pathway to reform. Although the legal services sector is becoming more competitive, there are still areas requiring intervention in the interests of consumers that can only be achieved by legislative reform.

The unauthorised sector has continued to grow through developments in lawtech

“For example, we need to regulate lawyers by the work they do, rather than their professional title – if you want your teeth seen to, you don’t visit a GP – and it’s time we recognise the benefits that diversity in the legal profession can bring.

“The rigidity of the current framework does not recognise large pockets of existing providers, and without additional flexibility risks excluding also those novel technologies and solutions that lawtech can bring for the benefit of consumers and healthy consumer choice.”

Professor Bones also called for an “aggressive push” to make the CMA’s transparency recommendations happen. “We need more than baby steps to improve the experience of consumers looking for legal advice.”

But others preach far more caution. The then Law Society president David Greene cautioned that any further reforms “should not only focus on competition outcomes, but also on the public interest, the rule of law, access to justice, and an independent, strong, diverse and effective legal profession”.

The reality is that campaigners on all sides will argue that they are acting with the public interest, access to justice and so on in mind – the core regulatory principles that are at the heart of the Legal Services Act.

Eyes will now turn to the LSB. Its submission to the CMA indicated that it is impatient for quicker progress, including a single regulator for all lawyers.

It said legal services providers may have to be forced to publish prices across a wider range of practice areas than now to improve transparency, and that it would act if the operational separation between regulators and representative bodies was not matched by “cultural” separation.

“Overall, our assessment is that some limited progress has been made, but there is still much more that regulators and providers can do to improve consumer engagement and competition in the sector” the LSB said.

The Ministry of Justice has not yet issued a formal response to the CMA. Whatever it says – and Brexit and Covid make it unlikely to change its stance for now – ultimately the tensions that have underpinned the Act from the start can only be resolved by further reform.

The question that nobody can answer at the moment is when that might happen.