Time for the Tanaiste to take on the lawyers


BUSINESS OPINION: Mary Harney is big on competition. The outgoing and potentially incoming Tánaiste is fond of quoting Ryanair as an example of the benefits that competition can bring to consumers. She repeated this mantra many times while in Government and again on the campaign trail. Almost always it came with the the rejoinder that she would like to see done for the rest of the economy what deregulation has done for the cost of air travel.

In fairness to the outgoing administration it did make some progress in this direction; most notably the deregulation of taxis and chemist shops. The Competition Authority was revitalised, given additional new powers and direct responsibility for approving mergers.

The much delayed Communications Bill made its way through the Oireachtas in the dying days of the outgoing Government. It expands the Office of the Director of Telecommunications Regulation into a three-person panel with the power to fine non compliant operators up to 10 per cent of their turnover.

This gives the new body a fighting chance of reigning in Eircom, the dominance of which is increasing as its potential competitors struggle with various financial problems.

A number of other important items on the competition agenda remain unresolved as the Government leaves office. The most high-profile of which is the provision of enhanced terminal services at Dublin airport.

Aer Rianta's monopoly remains intact, although it has been ordered to build a low-cost terminal.

The standalone regulator for the financial services industry never saw the light of day, but the Central Bank has been reorganised, with a more powerful, accountable and consumer focused regulatory division. On balance it is a case of some things done, a lot more to do.

This morning, as her party representatives get down to the nitty-gritty of trying to agree a new programme for government with Fianna Fáil, the Progressive Democrats will have another opportunity to prove their pro-enterprise credentials.

The competition agenda for the next government can be summed up in three words: the legal profession.

If ever there was a cast iron case for tackling the self-perpetuating anti-competitive practices that abound in the legal profession, it was made in the Motor Insurance Advisory Board report published just before the election.

The economic cost of the lack of competition in the legal profession is eloquently illustrated by three figures quoted in the report: 39.5 per cent; 45.9 per cent and 56.4 per cent. These are legal fees expressed as a percentage of compensation payments in third party motor claims, employer liability claims and public liability claims. These fees feed directly into insurance premiums which are a major business cost, particularly for small business.

It is hard to think of any other professional service that operates on such margins. But it is equally difficult to think of any other profession that has so many anti-competitive aspects to it. The profession is self regulated, entry is restricted and at its heart is an archaic division between solicitors and barristers which contributes massively to the cost of litigation.

It is not surprising that the Organisation for Economic Co-operation and Development called for reform of legal services in its 2001 review of the Irish regulatory framework. "The priorities are to remove remaining impediments to competition amongst solicitors, or indeed between solicitors and barristers, and provide incentives for solicitors to ensure that even inexperienced clients receive barristers' services at competitive fees," according to the Paris-based think tank.

The OECD also recommended that "the control of education and entry to the legal profession should be moved from the self-governing bodies, but close ties as regard quality of entrants and contents of education should be retained".

The legal profession was one of a number of sectors examined by the OECD in 2001. Most of its recommendations regarding other areas of the economy such as the gas and electricity industries, along with pharmacies have been acted on, but the Government has been very slow to take on the lawyers.

The issue is currently with the Competition Authority which began a wide-ranging examination of competitive practices in the legal and other professions last May. The authority appointed consultants to assist it in March and is not expected to report until the end of the year. The authority has made it clear that it is engaged in enforcement action and the report is only intended to stimulate debate.

With both the OECD and MIAB reports well aired at this stage it is hard to see why we need any further debate over regulatory reform in the legal profession. What is needed is determination on the part of the government to take advantage of the wind blowing in its favour to push through reforms. The MIAB report and the issues it raises are due to resurface in the autumn when the body set up to implement its recommendations reports back. The new government can take advantage of the momentum for reform engendered by the report to push through changes. A good step would be a firm commitment to do so in the Programme for Government that will emerge if the negotiations starting today ultimately prove successful.

It will not be an easy job. There are few bodies better placed to protect themselves from unwanted interference than the legal profession. Any serious attempt to push through changes would be fought tooth and claw.

Its not surprising then to hear that the Tánaiste may vacate her berth at the Department of Enterprise and Employment for a new department of infrastructure and transport. Sorting out Dublin's traffic is probably an easier task than sorting out the Law Society and the Bar counsel.