Divorce one, sue one free

Proposals to deregulate the legal profession would see brands permitted to provide legal services for the first time. But would this lead to an erosion of the legal profession’s impartiality?

One day, you might drop in at your local supermarket to get a divorce, ring your bank for help in suing a neighbour or contact your vehicle breakdown service to find a solicitor to act in a dispute against a dishonest garage owner.

The legal world is the latest regulated area which could be opened up to competition from brand owners, under plans dubbed “Tesco Law” by Lord Falconer, the Lord Chancellor.

Falconer wants to see consumer-focused brands such as supermarkets given the opportunity to set up or buy into law firms and to sell branded legal services. A Tesco spokeswoman says the chain has no plans to enter this field should it be deregulated, although it may consider doing so in the future.

A Government-commissioned review of the legal sector, conducted by Prudential chairman Sir David Clementi, published a consultation document last week. One proposal is to get rid of rules that require law firms to be wholly owned by solicitors. This would pave the way for acquisitions, mergers and launches of law firms by private companies and would usher in a new era where full legal services could be provided by big-name brands.

Legal services is a massive market, potentially worth billions of pounds, and the sector’s commercial structure could be ripe for cost-cutting. Most big brands are playing a waiting game, refusing to reveal whether they would take up the opportunity to launch law operations under their own names.

Counsel, but not counsel

Motoring services group the RAC is one of the few willing to discuss legal deregulation. Its management believes that it could offer its members relevant legal services on motoring-related cases and is supporting proposals for a shake-up of the ownership rules. Under current rules, the RAC can advise its members on their legal position, but cannot act on their behalf, as only solicitors are permitted to do this. “We want to set up our own solicitor service and we see the RAC brand as a very good selling-point,” says RAC head of legal practice Jonathan Gulliford. “It is not a case of setting up a completely new business, so it is not stretching the brand. The RAC was originally established to provide legal advice and assistance – the breakdown service came later,” he adds. He says that the most common request the RAC receives from customers who are given legal advice is for the company to also carry out the legal work.

One of the great improvements Gulliford believes the RAC could initiate would be in providing much clearer information about pricing. Fees and costs would depend on the services being used, but he adds: “I am very much in favour of – and our members say they want – absolute transparency in pricing. They want an accurate assessment of solicitors’ fees and to be told up front.”

But the RAC is proposing only a limited foray into legal services: acting for customers on specific motoring matters. It has no plans to expand beyond those areas, though Gulliford accepts that eventually this might be an option. He claims there is little practical difference for the RAC between offering legal services and its current practice of having a list of solicitors customers can be referred to should they need one.

Clementi will publish his final report at the end of the year and Gulliford thinks that if recommendations to allow non-lawyers to own law firms go through, “RAC Law” or “RAC Legal” could be launched by 2006.

The reluctance of other brands to declare an interest in entering this field may reflect concerns that some of the negative images associated with hiring a solicitor could stick to them. Brand values such as “time- consuming”, “expensive” and “no guaranteed outcome” are not the sort that Tesco, Virgin or Lloyds TSB would want attached to their names.

Would they really be interested in getting involved with emotional and messy divorce cases or coming between neighbours (possibly both customers of their other services) who are bickering over the height of a hedge? “Get divorced at Tesco” is hardly a positive message for the supermarket.

And what if two of the RAC’s customers decided to sue each other? Gulliford says that the company would decline to act for either of them and refer them to other solicitors.

Brands could suffer from all sorts of negative sentiments if they launched legal services. Only last week, former transport minister Stephen Byers hit out at what he called the “compensation culture”, after a rise in costly legal actions against hospitals and schools. There have also been criticisms of so-called “claims farmers”, which were set up after the Government abolished legal aid for personal injury cases in favour of solicitors practising on a no win, no fee basis. It has been a controversial area, particularly after two companies facilitating this – the Accident Group and Claims Direct – collapsed, though the latter’s brand has since been resuscitated under different management.

Will profit breed prejudice?

Brands may also be evaluating the objections of some lawyers to opening up the field to competition. Stephen Irwin QC, chairman of the Bar Council, which represents and regulates barristers in England and Wales, believes Tesco Law would lead to a conflict of interest between lawyers’ professional and ethical judgement and private companies’ need to make profits. He also doubts that Clementi is very keen on the idea of deregulation himself, and believes that it is far from certain that Tesco Law will be introduced as a consequence of the review.

“Worldwide, there has been thought about whether law should be more business-like and opened up to ownership by non-lawyers. Every other jurisdiction has rejected it, even the US,” says Irwin. He warns that disreputable operators could be attracted to owning legal firms – “Robert Maxwell Law”, as he calls it. “We are not a service industry and justice is not a commodity,” he says. But most importantly for service brands, he poses the key question: “What is the gain to the client?”

The way Tesco Law would be regulated is another worry. Some are concerned that brands offering legal services may be tempted to market them through cross-selling. This may be outlawed by regulation, but Clive Sutton, chairman of the Solicitor Sole Practitioners association, points to recent revelations about how regulators at the Financial Services Authority failed to protect Equitable Life customers.

“The law is an independent, objective profession aiming to give fair and frank advice. It is not there to sell insurance policies. If you get big companies promoting their brands, the lawyers can’t help but be influenced by their employers,” he says. And he believes that the involvement of big brands in setting up “law factories” could wipe out thousands of high street and other small legal firms.

Some brand-watchers welcome deregulation as an opportunity for big-name service brands to use their skills in undercutting established players and simplify complex jargon. Parallels have been drawn with the way retailers and other service brands have shaken up the world of financial services with low-cost, easy-to-understand propositions.

Cranfield School of Management professor of brand marketing Simon Knox says: “I think it is a great idea. Such deregulation can only increase the availability of legal services. It brings them to the people, as has happened with financial services. What an impact Tesco and Sainsbury’s have had on bringing to the common people what seem to be complex financial products.”

Even critics of Tesco Law accept that there would be little harm done if the RAC were allowed to own a legal practice – it is a reputable company planning a limited foray into legal provision. But other brands have to weigh up whether launching a branded law firm would turn out to be a profitable sideline or more trouble than it is worth.

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