Firms see the Office of Fair Trading’s investigation into the accounting and legal sectors as a hammer being used to crack a nut, but the inquiry could have far-reaching effects. Dominic Egan reports.
The news that the Office of Fair Trading (OFT) is to probe restrictive practices in the accountancy and legal professions was met with a lukewarm response but its impact on partnerships and industry bodies is set to be far greater.
The inquiry, announced last month, is to be conducted by its director general John Bridgeman, who will be reporting to the Department of Trade and Industry and Treasury ministers later in the year.
Although firm details are scarce and the OFT is reluctant to offer information, the inquiry will focus on the potentially prohibitive nature of the profession’s entry requirements, examine possible anti-competitive conduct rules, and ask whether regulations demanding that the public consult a lawyer should be changed when other appropriately qualified non-lawyers could do the job equally well.
The news of the the inquiry has not been met with panic in the City or the regions. “My first impression was that it is a complete waste of time,” declares a partner from a leading regional firm.
Such apathy has its foundations in one of two camps. Past experience has left many observers with the impression that inquiries change little; others say that the profession has become so adept at self-regulation that it is already one of the most competitive areas of business and consequently an inquiry will serve no purpose.
The bar tends to fall into the first camp, with one senior clerk, who prefers to remain anonymous, summing up the consensus of opinion. “If you look back, there’s been the Royal Commission… But it had no impact.”
Solicitors, meanwhile, tend to fall into the second camp, with Wragge & Co’s senior partner John Crabtree voicing a typical sentiment. “I’ve never seen any sign of any anti-competitive practices in the legal profession. It’s just too bloody competitive!” he says.
Allegations of price-fixing are entirely misconceived, he says. “You could say that there are only three or four firms in Birmingham which could do flotations, for example. So, you could say, why haven’t we all got together and said we’ll do them all at £25,000 a throw?
“No one’s ever suggested we’ll have the same hourly rates for any type of work.”
The legal profession is by no means perfect, concedes Crabtree. However, it is much improved. “There are bits of the law where I feel we are still a bit parasitical, but we’re a lot better than we used to be,” he says. “Most of our clients are sophisticated buyers who feel we give value for money.”
However, despite the feeling that the inquiry is likely to be another example of the Government cracking down on ‘fat cat’ professionals, the OFT’s inquiry does have the potential to make a significant impact in two areas – multidisciplinary partnerships (MDPs) and the future roles of the profession’s two governing bodies, The Law Society and the Bar Council.
There has been considerable speculation that the OFT report will contain a recommendation that the regulations be relaxed in order to allow lawyers to enter into MDPs with non-lawyers. Far from frightening lawyers, the proposal receives strong support in some quarters.
“All the big firms are already MDPs,” says Paul Smith, a partner at Eversheds in Leeds. “We employ human resources consultants, all sorts of people. We can’t be in partnership with them, but we can employ them. The next step, given the speed of change in technology, is that we have information technology professionals as partners, because half the job for us is convincing clients that we can connect with them via technology.”
Wragges’ Crabtree admits that he is frustrated by the rules.
“Last week, I wrote a letter to the Law Society saying, if you’re not going to make up your minds about MDPs, because it’s all too complicated for you, why don’t you at least say that law firms in which the majority of the owners of the business are qualified solicitors – and I don’t really care what that majority is, it can be 95 per cent or 75 per cent, say – can have non-solicitors as partners?
“In Wragge & Co’s case we’ve got people like [marketing director] Jenny Hardy who we treat as a partner and is in every way a partner of the firm except for some Solicitors Act regulation.”
But wouldn’t changing the rules play straight into the hands of the accountants?
“I think that whole debate is old hat,” says Crabtree. “Whether they relax the rules or not won’t make any difference to whether Arthur Andersen and Garretts can succeed with an MDP in my view.”
The regulations, he points out, have not prevented the accountancy firms from setting up legal practices that are MDPs in all but name.
The governing bodies
The only threat that MDPs pose is to the regulatory bodies, claims Smith. “You hear of these debates within the professional accountancy bodies and the professional legal bodies across the world deciding how they’re going to regulate multidisciplinary practices… I think the whole notion of professional bodies is really under scrutiny.
“They’re increasingly seen as there to protect restrictive practices rather than acting in the best interests of consumers.
“It does beg the question, what is the role of the Law Society and the Bar Council, the professional association? If you look at Europe, the impression is that they are there to prevent change, to try to stop advertising, to stop marketing… I always think it’s sort of King Canute stuff.”
The boundaries between lawyers and other professionals have already begun to break down, says Smith.
“Most of my work is for in-house lawyers and they simply go on the internet and just see what information is out there.
“I don’t think in their minds they make any distinction whether it’s a solicitor providing it or it’s an accountant. It’s just somebody offering a product.” The regulatory bodies are being foolish if they think they can halt this process because the market forces are unstoppable, he adds.
The Law Society’s role must change, agrees another regional lawyer. The society, he says, can never hope to re-establish its good name while it continues to act as both the regulatory body and the lawyers’ trade union. “It’s a complete conflict of interest, isn’t it? Even if they, with their hand on their heart, think they’ve got some kind of Chinese wall, the perception is hopeless.
“On the one hand, they’re protecting the consumer and on the other, they’re shop stewards for the industry,” he says.
The big question is, how much longer will solicitors and barristers tolerate being governed by bodies that are hopelessly out of touch and crippled by internal politics? Far from encouraging competition, the Law Society and the Bar Council have blindly resisted reform.
By doing so, they have only served to hold the profession back. Many argue that it has been increased competition – particularly over the past 10 years – that has made the legal profession stronger today than it has ever been.
Direct access to the bar
It is possible that the OFT inquiry will recommend a change in the rules to enable members of the public to instruct barristers without employing the services of a solicitor. Although some barristers have voiced considerable support for such a move, many harbour doubts over the bar’s ability to cope.
Shielded from the public by solicitors, barristers have had extremely limited opportunities to develop client skills. Indeed, given the reputation of some barristers for pomposity, many solicitors will greatly enjoy the thought of the bar being unleashed on an unsuspecting public. Furthermore, the bar has relied on solicitors to do the vast majority of the early case legwork. Having to start a case from scratch will not appeal to those barristers who are in the habit of demanding that their work be delivered to them on a platter.
‘I think the majority are bothered about it [direct access] only to the extent that they don’t want it, because they couldn’t handle it,’ states a senior clerk with a top set of chambers. ‘You just imagine them saying, ‘You mean ordinary people are going to come in here and talk to me?”
In any event, he adds: ‘The whole system just isn’t geared to coping with understanding the story from square one with a chap walking in and saying, ‘I’ve got a problem.’ By the time it gets down to the barrister, it’s very much distilled. They just haven’t got the mindset for coping with that and setting aside time to do it.’
The Law Society and Bar Council’s response
Asked for a response to the OFT inquiry, the Law Society declined to comment beyond declaring: “We look forward to co-operating fully with the OFT investigation. We are satisfied that our arrangements will be found to operate in the public interest.”
The Bar Council failed to return The Lawyer’s calls.