The prospect of retailers selling legal services will provide a new dilemma for the profession – whether to fight or join them.Dearbill Jordan investigates.
“Ten years ago Tesco did not sell petrol, newspapers, clothes, pharmaceuticals, perfumes, toys, CDs, videos or alcohol.
“Today, supermarkets are market leaders in most of these areas. Once multi-disciplinary partnerships (MDPs) are introduced it could take Tesco only three years to become a market leader in high street legal services,” said a Law Society Council member last week.
One year ago the thought of going into competition with the likes of Tesco and Richard Branson would have been too far fetched to warrant comment. But today the situation is very different.
While the Law Society is waiting for responses to its consultation paper on MDPs – issued in October – a number of very high-profile retailers are known to be actively examining the possibility of launching own-label legal services next year.
Until recently, MDPs have been seen as a potential threat to high street practices in allowing accountants, estate agents and others to swallow up law firms. But it is becoming increasingly apparent that the perception of this threat is far too narrow.
The ability of retailers to offer legal services has actually been available for a number of years through the Courts and Legal Services Act 1990. This allows any group or body designated by the Lord Chancellor's advisory committee to become an authorised practitioner in areas including probate, litigation and advocacy.
According to Law Society figures, the fast-approaching decision on MDPs could give retailers a push towards an industry with a yearly turnover of u8bn in England and Wales alone.
According to one retail consultant who works with one of the big four supermarket chains, legal services fulfil all of the criteria for own-label services. The legal market has weak brands and service is perceived to be both poor and over-priced.
Technology will be one determining factor. Paul Downing, head of corporate development for the PriceWaterhouseCoopers law practice warns: “There is a special relationship between a lawyer and client which might not suit mass produced services.”
However, says the retail consultant, several years ago nobody would have thought that you could do your banking anywhere other than at a branch. Now telephone banking is well established.
The retailers could come in with a strong direct service that some law firms are only experimenting with at the moment, he says.
Law firms are having to get used to a different, more competitive environment where companies are moving to investigate different methods of serving clients.
The areas of law that are of particular interest to the big brand companies are small claims, personal injury and conveyancing – many already sell mortgages and home buying services.
The success of volume conveyancing outfit Hambro Countrywide sets an ominous precedent. Set up in 1997 it provides its customers with a seven-days-a-week telephone service. Some lawyers predicted clients would still want the personal service offered by high street solicitors but in the last year Hambro has taken over 15,000 instructions.
According to Alison Crawley, head of professional ethics at the Law Society, these new techniques could provide a “hand-holding” service, after clients have approached a solicitor for initial advice in the case, for example, of a small, simple claim.
Similarly, the Bar Council believes that the new-brand legal services would have limitations. A Bar Council spokesman says: “The retailer could become involved in services like writing wills, but it will not be able to offer the sort of criminal defence that you can buy off the shelf.”
But such cries echo those of banks three years ago, when it was revealed that Tesco was launching a debit card with NatWest.
“The response from the financial services industry was that it could only be a loyalty card aimed at getting more punters into the store,” says the retail consultant, “How wrong they were.”
Within two years the major supermarket chains were offering current accounts, insurance, loans, pensions and the best interest rates on savings accounts in the market.
“The supermarkets are not worried about getting involved in areas in which they have no expertise. They can and will do anything they have to in order to dominate the market, any market.”
The retail consultant says: “Many of the supermarkets see the key battleground in the home, not in the high street. The key is to offer as many branded services as possible direct to home.
“That is why they got into financial services, direct mail, gas and electricity and IT and media services.
“Legal services would be an excellent fit. Not only do they have so much utility, but consumers are confused and mistrustful of the service they get from high street lawyers, just as they are with insurance companies and banks.”
He adds: “The fat cat image has become so popular with consumers because they think that lawyers are always trying to rip them off.
“So if you have a brand that people can trust and you can offer a cheaper and more efficient service, you have the potential to walk away with the market.”
Virgin is one of a number companies including Tesco, Sainsbury's and Marks & Spencer which launched own-branded financial services in alliances with institutions including The Royal Bank of Scotland and Abbey National.
Since its conception, Tesco's financial service has grown to provide loans, home insurance and pensions, while Marks & Spencer, which established its financial services over 10 years ago, purchased Citibank's Budgetcard business in 1987 and launched its fourth unit trust last year.
The question is whether the new retail legal services competitors will try to steal business from existing firms, or expand the market.
The evidence from financial services is that both results tend to occur, especially if an assault on the market is coupled with de-regulation.
Richard Branson's Virgin and the retailers de-mystify areas such as financial services and often transpose their brand values – in the case of Virgin fun, young and anti-authority – to the services they provide, often expanding the market to consumers who would normally be put off using the services.
Angela Deacon, sole practitioner representative at the Law Society says that own-label law might appeal to younger clients, but cautions: “Older clients tend to build up a trust with their solicitor. They like to know who they are dealing with.”
The financial services market responded to the supermarket invasion by first ignoring it, then attacking it, and finally joining it.
Law firms could follow the lead of financial institutions whose names are linked to the likes of Virgin Direct by forming an alliance with retailers.
Under the present Law Society rules, an arrangement similar to Australian insurance giant AMP holding a 50 per cent stake in Virgin Direct would be banned, just as there is a bar on non-solicitors having equity in law firms or sharing fees with non lawyers.
But Crawley says: “Alliance is possible under the current regulations, where Tesco could have a link to a company like Eversheds, where it could refer customers for legal advice.”
According to the Bar Council spokesman: “The legal profession should not resist anything and should compete on quality and cost.”
Some at the Law Society see retailer and big-brand involvement in legal services as inevitable and believe they should, as such, be embraced.
But the society's official position is to oppose such moves. Crawley says: “If a decision is made on MDPs, the way we would want to move would not be through retailers.”
Though the thought of getting into bed with the grinning Richard Branson may be appealing to some lawyers, the idea is certain to cause disquiet among most.
Those lawyers who wish to retain their independence and fight their corner, rather than join the retailers may take heart from the fact that the big brand players do not always get their own way.
While Virgin's business has diversified, powered by the perceived strength of the company name, recent bad publicity it has sustained over its rail franchise as well as its clothing and cosmetic venture could throw into doubt the standard of legal service it might offer.