The legal racket

For almost a year now a friend of mine has been subject to some of the most ridiculously bad customer service I have ever heard of. The perpetrator is a solicitor. Since paying this solicitor approximately £500 to finalise a simple, straight-forward divorce my friend has gone months on end without hearing anything regarding the progress; no phone calls, no e-mails, nothing. She has called the solicitor on several occasions in the last few weeks and each time has been told, “I can’t seem to find your file here; I think it’s in the solicitor’s office, but she’s with a client at the moment. Can I call you back shortly?” Each time, there has been no call back.Anyone experiencing this sort of disrespectful treatment, whether it be in a supermarket or a car showroom, would rightly walk out and take their business elsewhere, but in the law industry there is rarely any refuge to be found with an alternative supplier.

I would argue very strongly that such absurdly bad service is much more likely to be experienced in a market (such as the legal industry) where racketeering and monopolisation has occurred in order to reduce competition, and make entry difficult. When there’s relatively low competition and the price of the service hardly varies across providers as a result of it being kept artificially high, the end result is that there is no strong business incentive for a solicitor to provide even a basic standard of good customer service.

In the less regulated and manipulated markets in our world of state-controlled capitalism, such as retail for example, businesses who offer significantly poorer customer service (or products) than their competitors generally face going out of business if they don’t take action to improve their service or their products.

M & S’s (Marks & Spencer) transformation over the last decade or so, in terms of the experience they offer their customers, is a good example of this. It wasn’t so long ago that they didn’t accept credit cards, which was one of the reasons why, when competition started to increase, M & S profits started to nose dive as customers took their business elsewhere. M & S realised that they had to become much more customer-oriented or they faced going out of business. This was all driven by competition of course and resulted in a gain for consumers and, ultimately, a gain for M & S who are now once again one of the most profitable high street retailers. This is the pleasingly organic non-zero-sum game or win-win situation that arises from free trade, or in our case, trade with a larger degree of freedom.

Here’s another example of how unrestricted competition benefits consumer and provider. There’s a place in London called Brick Lane, which is famed for its numerous wonderful Indian restaurants. Brick Lane is a very popular spot and sometimes you’ll end up having to wait to get into your restaurant of choice. Whenever I find myself in this situation I never doubt for a second that the staff will do their utmost to get us in and eating as quickly as humanly possible. Why? Because if they leave us hanging around outside for 20 or so minutes they know there’s a rival outlet either side of them and opposite them just waiting to take our custom. Why are the restaurants in this one street of such high quality? Because competition is so fierce of course. The restaurants have driven each other’s standards to a exceptionally high level, and consistent competition keeps them there. Any that fall significantly below these standards will gain an unfavourable reputation and will go out of business unless they improve; even then, it may be too late. After all, reputations often precede us, and a good reputation is critical to the success of a restaurant or indeed any business.

In the industry of solicitors, however, it’s a very different story. Most customers, I would theorise, know that there’s little point taking their business elsewhere because it’s unlikely to be significantly cheaper or a significantly better experience with a different solicitor; and so they simply accept their lot. The solicitors get to charge an extortionate price for a service, which they can then go on to deliver in any manner they choose, over any length of time they choose, simply because they know they’re unlikely to lose their clients once they have begun dealings with them. Although not a zero-sum game (the client does get something eventually), this is a scenario where one party (the client) is getting very little value from the exchange, whereas the solicitor is getting highly inflated value.

On average, most solicitors charge an hourly rate of around £200. Hourly rates rarely fall below £100. So, given that my friend received a bill of £500 (and so did the person she is divorcing) it may be reasonable then to infer that it ‘cost’ the solicitor roughly four or five hours of her time. Presumably, after this time has been spent, the paperwork goes through the court procedures. According to several sources on the web, uncomplicated divorces generally take four to five months to complete. The time-scale of my friend’s divorce has been several months longer than the average, the reason for which still remains a mystery due to the complete lack of communication from the practice to the client.

To be allowed to practice as a solicitor (or lawyer) in the UK you must obtain a ‘practising certificate’ from the Solicitors Regulation Authority, which costs £1,142 per year. This is the ‘individual practising fee’. There is also the ‘firm practising fee’ which is based on a firm’s turnover. A firm with a turnover of approximately £800,000 would have to pay a fee of around £5,000. There is also a ‘brand new firm’ fee, which amounts to £2,800.

However, before applying for these ‘licences’ you must first do the following:

1). Qualify to become a solicitor by attaining a degree in law.

Seems pretty straight-forward, right? Not quite. The Solicitors Regulation Authority and the Bar Council oversee which law schools offer programs that are considered ‘qualifying law degrees’. The list of qualifying schools can be found on the Solicitors Regulation Authority website. You will be required to complete your degree in a reasonable time frame, which is one year for full-time study or two years for part-time study.

So, right from the very start of the process of becoming a solicitor or lawyer, the SRA is already exerting its self-proclaimed authority by only allowing people who have certain degrees from certain schools to practice law. Those ‘chosen’ schools clearly benefit from the SRA’s use of coercion, and this is an example of how other groups from other industries can benefit from a monopoly.

2). Enroll as a student with the SRA to obtain a certificate of completion of academic training.

But wait, there’s more hoops to jump through. Before you start the vocational phase of training, which includes passing the Legal Practice Course, you must obtain written confirmation from the SRA. The SRA vets all solicitor candidates for ‘character and suitability’ (the irony!) and you will need to declare any criminal convictions or other information from your past where your character has been called into question.

3). As mentioned above, Complete the Legal Practice Course.

Once you pass the course, you’ll have the opportunity to work as a trainee solicitor in a firm. The training period is generally two years.

4). Pass the Professional Skills Course. The course includes 12 days of full-time training and builds on the foundations of the Legal Practice Course.

So, why does all this exist? Well, the conventional wisdom is that these barriers to entry are in place so as to (in theory) guarantee a certain standard of legal practice for consumers; fundamentally it all exists for the benefit of the consumer, or at least that’s what everyone is told.

Here’s the reality. Basically, instead of letting free competition drive standards up, the SRA forces anyone who wants to become a solicitor to pay them money and to submit to their will in order to allow them to do so. The regulatory body also exists to act as an authority over legal practitioners and can fine (by way of taking ownership of practice monies) and shut down practices who are deemed to have violated one or more of the following statutes: The Solicitors Act 1974, European Communities Regulations 2000, Courts and Legal Services Act 1990 and the Administration of Justice Act 1985.

It’s not that the idea of trying to establish a certain standard of service in this way is bad per se. Standards, exams, licensing, skills courses, and training are generally good ideas, but they must be voluntary; for this is the only ethical and rational way – from the free trade point of view. Regulatory bodies and authorities are fine as long as people aren’t forced to pay them money just to enter into the industry. Again, if such bodies exist on a voluntary basis, then as well as adding value, they are also moral. If any given body or authority does good work, then those who hold its license will benefit from its reputation and will probably be able to charge more. but most importantly, the voluntary nature of the licence means others who don’t have it are not prevented from providing their services in direct competition.

Letting the quality of the products and services that individuals and businesses offer ‘decide’ who wins or loses benefits buyers and sellers; which is what we should all desire given that we all play both roles throughout our lives.

I think it is reasonable to suggest that there are a significant number of people who are very knowledgeable about law and could give you excellent legal advice, but who have not taken the required steps as described above (or paid the filthy lucre) to become a ‘licensed’ practitioner. Of course, if such a person is caught by the police or an ‘authority’ giving legal advice then some form of coercion or violence will be used against them as a punishment. Clearly, this helps protect the interests of the ‘licensed’ practitioners. If thoughts of the Mafia are coming to mind at this point, this is perfectly understandable. The principle is exactly the same, it’s just in this case the perpetrators are rich, well educated, upper class white people, and the coercion and violence ‘legal’.

Imagine, for a moment, that ‘unlicensed’ people were able to compete freely with the ‘licensed’ solicitors. What effect might this have? Almost certainly, it would drive prices down a significant amount. There would surely be a much greater variance in hourly rates, mostly towards lower ones. For example, some guy who knows all there is to know about divorce settlements and not much else, might find he does best charging only £50 an hour. Naturally, it would also lead to an increased variance in quality of legal advice. With a market twice or triple the size you would probably be more likely to encounter poor quality service, but, crucially, you would also be more likely to encounter excellent service in terms of both quality of legal advice and value for money.

There’s no denying that the risk of receiving bad quality legal advice would increase (to some degree) in a truly free market, but unfettered market forces would minimise this risk. Again, the retail industry is a good analogy here. Retail outlets range from prolific chains, such as Next, to small independent shops in local markets and high streets. The spectrum of customer service experience is broad, some stores put great effort into customer service and other stores barely acknowledge your presence, but you’d be hard pressed to find a shop where the owner shoved your arm behind your back, held a knife to your throat and forced you to buy 15 pairs of trousers from him.

Reputation is everything to any tradesmen or business wanting to actually remain in business. A solicitor who gives bad legal advice, cheaply or not, is highly unlikely to last in business long enough to make significant ill-gotten gains; especially in today’s world where bad reviews of products and people can spread like wildfire across the Internet.

This is the irrational fear that most people have about truly free market capitalism, that each day evil people will sit on their piles of ill-gotten riches twiddling their moustaches and thinking up new ways to add to it. Yes, truly free trade comes with risks, but these are outweighed by the benefits to both buyer and seller. All we can do is use reliable reviews, word of mouth, information sources, and our common sense and judgement when deciding to buy a product or pay someone to perform a service. Just like life, you can never be 100% sure of what you’re going to get, but if you keep your wits about you and do your homework you’ll be fine.

In the legal industry today, you can be quite confident that you will have to pay lots of money for a solicitor’s time, that whatever they’re doing for you will take longer than it really should and that you will be treated like one of thousands of fish in a barrel.

That solicitors act the way they do is not surprising, after all they’re merely human creatures acting logically to exploit the monopolistic advantages that they have. If you can get away with charging £200 an hour, then why not do so, right? If I were a solicitor, I think the fact that most of my peers were charging the same amount might help alleviate any lingering moral doubts over the justification of my hourly rate. If everyone else is charging this amount, then I’m not the only one to blame. Comfort in numbers.

It’s hard to conceive of any good reason why an uncomplicated divorce, in a truly free and peaceful market of legal practitioners, couldn’t be conducted over the Internet and completed within a few days for a reasonably small fee – certainly less than £1000. We can but dream. If the industry was free and not distorted, corrupted and closed-off, all kinds of solutions would be available, at a range of prices.

In a world where exploiting institutionalised powers of coercion and violence is simply not an option, the non-zero-sum game, win-win situation is at least a possibility, at most a near certainty. In the world we live in, it’s virtually impossible.

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