Consumer concerns don't begin and end with alternative business structures

WHEN it first emerged that Which? had made a super-complaint to the Office of Fair Trading (OFT) about the Scottish legal services market, few solicitors seemed to expect it would amount to much.

After all, it was barely a year since the Scottish Executive's Research Working Group report, which had included significant input from the OFT, recommended that there was no need to intervene in the marketplace - at least not yet anyway.

But following the super-complaint, the OFT has, indeed, called for some significant changes with potentially far-reaching implications for the profession and the public.

While it has stopped short of endorsing the call for an independent Legal Services Board to take over the regulatory roles of the Law Society of Scotland and the Faculty of Advocates, the OFT has agreed with Which? that allowing lawyers to adopt alternative business structures may benefit consumers.

Provided "appropriate safeguards" are in place to protect consumers and the integrity of the profession, the OFT argues the current restrictions are unnecessary, and prevent both solicitors and advocates from "innovating" to meet the needs of their clients.

For those solicitors who want to see a level playing field with English firms in the post-Clementi era - and those advocates who have recognised the need to gain a more competitive edge in the marketplace - a move towards alternative business structures may be welcome, if only because it provides some clue to the likely way ahead.

Some of the current market restrictions, such as the Faculty's controversial "mixed doubles" rule, preventing advocates from teaming up with solicitor advocates, certainly seem ripe for reform. Many clients will also see the merit in cutting out the so-called middle man and allowing consumers to instruct an advocate direct, without also paying for the additional expense of a solicitor.

From the Faculty's point of view, allowing consumers to go straight to an advocate might also help to counterbalance increased competition from solicitors and solicitor advocates. Adapting to compete in the marketplace will be crucial if alternative business structures erode their key selling point of being independent sole practitioners.

But wider concerns for the profession and consumers must remain. Both the Society and the Faculty have already warned of the danger of applying Clementi-style reforms to the Scottish marketplace when access to justice is already a significant problem in remote and rural areas.

However, the OFT takes the view that this is not sufficient justification for maintaining the status quo. Indeed, its response to the super-complaint notes that firms reported this problem was closely related to rates of legal aid and falling profit margins, and that outside ownership of firms might actually help to improve their management.

Yet questions are also being asked as to whether there could be unintended negative consequences for consumers of opening up the market. Is there potential for alternative business structures to impact on the quality of service in future?

Richard Smith, the interim chief executive of the new Scottish Legal Complaints Commission, which will become the gateway for service complaints next year, suggests the new commissioners may want to explore the implications, for example, of solicitors supervising more non-legally qualified staff.

"The OFT response has prompted discussion about the so-called Tesco-Law business model," he says. "This is caricatured as an office block full of paralegals, supervised by a handful of solicitors. I think the commissioners would want the debate on the reform of business structures to include proper consideration of how to assure competent service delivery and that clearly includes the issue of adequate supervision."

Smith points out that, even without the advent of alternative business structures, the issue of supervision of staff is already "an important and growing concern".

He adds: "The Scottish Paralegals Association advises that there are now more than 6,000 paralegals working in public-facing practices. The Legal Profession and Legal Aid (Scotland) Act 2007 doesn't mention paralegals - it makes the assumption the practitioner is responsible for actions by staff.

"It is very likely the commission will uphold some complaints against solicitors where, as revealed in the investigation, it was a paralegal and not the solicitor who was directly involved. Any such failures will trigger the question of whether the solicitor adequately supervised that member of staff. I can see the commission pressing the Law Society of Scotland to consider inadequate supervision as a matter of misconduct."

It seems clear any firms wishing to adopt alternative business structures - particularly if it involves moving towards a greater volume of work - will need to ensure they have robust quality-control systems in place to avoid falling foul of the new commission.

Earlier this year, Smith sent out a strong message to the profession that it should set new standards for service, before the commissioners start defining them through their investigations into complaints. "If the professional bodies do not move far enough and fast enough, the commission will, through its adjudications, start to determine what is acceptable service practice," he said.

The Society has started working on two key initiatives that it argues will address such issues. It is currently engaging with the profession on the question of alternative business structures: it will hold a major conference next month, followed by a consultation paper in the autumn.

An expert working group is also drafting new standards of conduct and service, which are expected to be brought before the Society's next AGM in the spring, ahead of the new commission opening for business.

Richard Henderson, the Society's vice-president, described this as an opportunity for the profession to "debate seriously... what actually sits at the heart of legal practice and to spell out what lawyers stand for".

Certainly, the Society is taking pains to communicate the message that the profession is not resting on its laurels and wants to drive up standards.

But the fact both the Society and the Faculty called on the OFT to take no action on the super-complaint suggests they may still need to grasp that, in future, it will be the consumer, not the lawyer, who will sit at the heart of legal practice.

Yet the profession does have a window of opportunity here.

The OFT has urged the Society and Faculty to update their practice rules to sweep away the restrictions identified in its report.

They might do well to take the initiative swiftly or find that further reforms are imposed from on high.