In the UK, there is now a system in which lawyers and non-lawyers can co-own and can have outside investors in legal service providing organizations. They are called ABS (Alternative Business Structures handbook here). A recent research report on pricing of routine legal matters appears to challenge the hope/expectation that such systems will reduce prices. (Here is Richard Moorheads’s comment)
Specifically, the report asserts that: “There were no significant differences between the prices of Alternative Business Structures and other firms.” I suspect that careful additional study might suggest that in some areas there are such pricing impact, but in any event, the supporters of this approach should not be too discouraged.
Above all, we do not know what might have happened to prices had ABS not become available as competitors. (Prices seemed to go up, but we do not have the comparison). These were not comparisons with non-lawyer entities, rather those with flexibility on ownership and investment. We do not know, this early in the experiment whether there is a long term impact.
Notwithstanding these caveats, the research does suggest that any magic bullet in ABS is not automatic. Without knowing much more, I would want to know how much flexibility has actually been taken advantage of, and particularly whether this has led to new serve delivery mechanisms. This might e exceptionally useful as we move forward on the design of changes in our system.
More generally, the conclusions from the study as a whole may be of interest:
- Prices vary significantly for some common legal services showing that it pays consumers to shop around.
- 17% of firms display their prices on their websites; firms who do display prices on their websites are generally cheaper than those who do not.
- Legal service providers adopting a fixed fee approach to charging tended to offer the lowest price on average when compared with those charging in other ways.
- Fixed fees predominate for less complex matters (conveyancing, wills, power of attorney and for simpler uncontested divorces). As the services sought became more complex, providers were more likely to say they would charge either an hourly rate or estimate the total cost.
- The majority of firms (67%) stated that their prices had stayed about the same over the last 12 months. However, amongst those reporting a change, the balance was very much in favour of a price increase (29% reported that prices had increased and just 4% that they had decreased).
- There were no significant differences between the prices of Alternative Business Structures and other firms.
- There was no clear pattern when looking at how prices varied by size of firm.
- Firms based in the South East of England charged significantly higher prices across each of the services tested compared to firms located elsewhere. Firms based in England typically charged higher than those based in Wales.
- Firms quoted lower prices in deprived areas when compared with the more affluent areas, across all scenario groups.
- The majority of firms believed that in most cases services were not likely to cost customers more than initially quoted.