Here’s a story, Plan for Supermarket Legal Advice (BBC, 3/20/05) about a proposal that will shake up the legal profession in England and Wales by allowing commercial businesses to own and run law firms.   The intent of the proposal, known as the Tesco law, is to make legal services “a better deal for consumers.”  Under the plan, commercial interests like insurance companies or supermarkets can invest in, own and manage legal services.  In addition, the new plan would allow lawyers to work in partnership with non-lawyers such as accountants or financial advisors.  (incidentally, I have no idea where the ABA and the various state bars stand on multi-disciplinary practice.  I took a look at the ABA Web Resources on Multi-Disciplinary Practice but it’s not clear whether much has happened beyond debate (as with the seemingly endless debates and commissioned studies over the billable hour)

I’m all for proposals that open up competition in the legal profession and reduce costs.  But when I read about this idea, all I could think was Enron.  And surprisingly, even though the Tesco multidisciplinary proposal is being debated overseas, I wasn’t the only one who thought of the Enron analogy either.

12 Responses to Consumers Can Buy Legal Advice in Supermarkets Across the Pond

Carolyn, the instant mention of Enron — the symbol of the worse corporate scandal in our history — is neither helpful nor apt. It sounds like the silly scare tactics of a guild trying to hold on to its customer base — which is exactly the context it was used in the Financial Times article to which you linked.
We sure couldn’t think of any law firms — mega, medium or solo — whose financial shenanighans hurt clients.
I think Lord Falconer, the UK Lord Chancellor showed he is aware of the issues that need to be addressed as they move toward non-lawyer ownership. In his speech on March 21, he said:

I support progressive moves towards new business structures. These could see non-lawyers for the first time not only as managers of legal practices but also as owners and investors in them.
These are permissive steps, not requirements. We believe that new ways of working and new capital could encourage innovations in delivery – innovations of benefit to consumers.
But there must also be robust safeguards.
We have had a number of informative discussions on new business structures with consumers and practitioners. We need to ensure we get the balance of regulation right or this will not be attractive either to consumers, the profession, or potential investors.
What is needed is a strong licensing arrangement for new business entities, to provide the assurance that all involved will rightly demand, that those who run these businesses and own them are fit to do so.
Firms operating within the new business structures will need approval from the Legal Services Board to provide their services. If these extend significantly into areas beyond the Board’s competence, approval and oversight by other regulators will be required before the services can be offered.
Increased liberalisation, supported by stringent regulation, will provide the opportunity for people to get the whole range of services they want, in the form they want and at the time that they want. Putting the consumer first. This may be 24 hours a day, 7 days a week. I do not know what form these services may take and it’s not for me to decide. Demands will continue to change and providers will need to continuously adapt to meet these demands.

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Carolyn, the instant mention of Enron — the symbol of the worse corporate scandal in our history — is neither helpful nor apt. It sounds like the silly scare tactics of a guild trying to hold on to its customer base — which is exactly the context it was used in the Financial Times article to which you linked.
We sure couldn’t think of any law firms — mega, medium or solo — whose financial shenanighans hurt clients.
I think Lord Falconer, the UK Lord Chancellor showed he is aware of the issues that need to be addressed as they move toward non-lawyer ownership. In his speech on March 21, he said:

I support progressive moves towards new business structures. These could see non-lawyers for the first time not only as managers of legal practices but also as owners and investors in them.
These are permissive steps, not requirements. We believe that new ways of working and new capital could encourage innovations in delivery – innovations of benefit to consumers.
But there must also be robust safeguards.
We have had a number of informative discussions on new business structures with consumers and practitioners. We need to ensure we get the balance of regulation right or this will not be attractive either to consumers, the profession, or potential investors.
What is needed is a strong licensing arrangement for new business entities, to provide the assurance that all involved will rightly demand, that those who run these businesses and own them are fit to do so.
Firms operating within the new business structures will need approval from the Legal Services Board to provide their services. If these extend significantly into areas beyond the Board’s competence, approval and oversight by other regulators will be required before the services can be offered.
Increased liberalisation, supported by stringent regulation, will provide the opportunity for people to get the whole range of services they want, in the form they want and at the time that they want. Putting the consumer first. This may be 24 hours a day, 7 days a week. I do not know what form these services may take and it’s not for me to decide. Demands will continue to change and providers will need to continuously adapt to meet these demands.

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David,
I think you may know that I am as concerned as you about the high cost of legal services and support competition in the legal industry and to put pressure on price. Thus, I don’t advocate shutting down services like We the People and support pro se programs and the like. But I am very uncomfortable with outside companies investing in law firms because I believe that they may pressure lawyers to reach results that benefit the company rather than the clients. The problem at Enron (really more so with Arthur Anderson) was that lawyers kept their mouths shut or facilitate wrongdoing because their success was too closely tied to the success of the company. But another analogy is HMO’s – many times, they pressure doctors to make decisions to maximize profits which are not always consistent with the applicable standard of care.
Having said tht, I am still interested in reading more about the British proposal to see if there are other aspects of it that would be useful here.

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David,
I think you may know that I am as concerned as you about the high cost of legal services and support competition in the legal industry and to put pressure on price. Thus, I don’t advocate shutting down services like We the People and support pro se programs and the like. But I am very uncomfortable with outside companies investing in law firms because I believe that they may pressure lawyers to reach results that benefit the company rather than the clients. The problem at Enron (really more so with Arthur Anderson) was that lawyers kept their mouths shut or facilitate wrongdoing because their success was too closely tied to the success of the company. But another analogy is HMO’s – many times, they pressure doctors to make decisions to maximize profits which are not always consistent with the applicable standard of care.
Having said tht, I am still interested in reading more about the British proposal to see if there are other aspects of it that would be useful here.

Reply

I dare not be so bold as to criticize his royal greatness, the most high Lord Falconer, or, hopping across the pond, certainly anything with even a whiff of the Ivy League. That would be beyond the pale and I will refuse to engage in any such dishonorable behavior.
Yet, I can’t help wondering why exactly there is such a burning need for Wal-Mart, Safeway, AIG, Microsoft, ExxonMobil, and Berkshire Hathaway to own law firms and attempt to run them as for-profit businesses, wringing every last possible drop of profit out of them.
In the business world, the ultimate ethic is making money. In the practice of law, making money is secondary to serving one’s client and the justice system. At least in theory. The last time I checked it was. That would seem to raise the question of which ultimate ethic would prevail in such mutant combinations.
In America, we have, if anything, too many lawyers. There is no need here to plunge into the capital markets seeking speculators and investors to raise money for new law firms. Perhaps the situation is gravely different in England.
Most likely, however, this is another case of the tidal force of social control, working against individual rights, that is currently sweeping Europe. Certainly, if I were an English barrister I would fight his royalness, the most honorable Lord Falconer, and his plan.

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I dare not be so bold as to criticize his royal greatness, the most high Lord Falconer, or, hopping across the pond, certainly anything with even a whiff of the Ivy League. That would be beyond the pale and I will refuse to engage in any such dishonorable behavior.
Yet, I can’t help wondering why exactly there is such a burning need for Wal-Mart, Safeway, AIG, Microsoft, ExxonMobil, and Berkshire Hathaway to own law firms and attempt to run them as for-profit businesses, wringing every last possible drop of profit out of them.
In the business world, the ultimate ethic is making money. In the practice of law, making money is secondary to serving one’s client and the justice system. At least in theory. The last time I checked it was. That would seem to raise the question of which ultimate ethic would prevail in such mutant combinations.
In America, we have, if anything, too many lawyers. There is no need here to plunge into the capital markets seeking speculators and investors to raise money for new law firms. Perhaps the situation is gravely different in England.
Most likely, however, this is another case of the tidal force of social control, working against individual rights, that is currently sweeping Europe. Certainly, if I were an English barrister I would fight his royalness, the most honorable Lord Falconer, and his plan.

Reply

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