Buys Inc. Lodge Complaint with Competition Commission

The legal profession is yet again under close scrutiny, after a complaint about certain practices was lodged with the Competition Commission. Unlike previous complaints and investigations launched by the Commission itself, the latest complain originated from within the profession. “Our complaint is directed at a number of anti-competitive rules of the different Law Societies that prohibit law firms from marketing themselves, gain financial investment, establish staff incentive schemes and offer legal services at rates lower than the prescribed minimum fees” says Reinhardt Buys of IT law firm Buys Inc., who lodged a comprehensive complaint with the Commission on Friday morning. However, as far back as July 2004 the Law Society of South Africa filed an application with the Commission to exempt its rules from the operation of the Competition Act. The Act provides for the exception of the rules of professional bodies if such rules are aimed at the maintenance of professional standards or necessary for the ordinary function of the profession. The categories of rules the Law Society wants to exempt are also those targeted in the Buys complain and include rules on fee tariffs, advertising and marketing, organisational forms, multidisciplinary practices and reserved work. A similar application by the advocates’ profession to except the rules of the Bar Council ended up in the Supreme Court. In deciding whether or not to exempt a rule, the Commission should have due regard to international norms. Sir David Clementi recently published a full review of the legal services profession in the United Kingdom and Wales and concluded that a new regulatory framework is needed that promote competition and innovation. Such a framework should split regulatory and representative functions and allow for alternative business structures. “The basis of our complaint is that the current South African regulation of attorneys fails to recognise the difference between regulation of the profession and representation” explains Buys. “Although is may be true that the Law Societies represent the legal profession, it is simply not correct to assume that they should also regulate the profession. It is a well accepted international norm that representation and regulation are and should be two very different functions. Within our legal profession, these rules and functions are confused and the representative body is also the regulatory authority. Imagine of Vodacom, Cell C and MTN jointly regulated mobile communications. Thankfully and correctly so, mobile communications is regulated by ICASA, an independent statutory authority. Imagine if a group of liquor store owners replaced the Liquor Board to regulate and license liquor stores. Imagine if cabinet replaced the Constitutional Court to regulate government’s actions.” During a conference sponsored by the Law Society, the Chairman of the Commission on Gender Equality, Joyce Piliso-Seroke stated that the legal profession continues to discriminate against women and that sexual harassment and negative attitudes towards younger women attorneys continue. The comments by the Gender Commission echo the findings of a 1999 discussion paper on transformation in the legal profession conducted by the Department of Justice. Professor Cheryl Loots, who drafted the discussion document, concluded that “[t]he legal profession does not represent the diversity of South African society. The number of black lawyers in private practice and in the public service sector is comparatively low, as is the number of women. Black people and women are almost entirely absent from the ranks of senior partners in large firms of attorneys and senior counsel at the Bar”. “Disadvantaged law graduates experience difficulty in entering the legal profession and establishing themselves as successful legal practitioners. There is a lack of equality within the legal profession with regard to qualification requirements for admission to legal practice which leads to the undesirable perception that some lawyers have a higher status than others.” Restrictions on admission to the attorneys’ profession also come under fire in the Buys complaint. “Currently only those who completed certain degrees at a university and completed the admission examinations may be admitted as attorneys. However, the admission exams only test four very limited fields of legal practice such as bookkeeping. In today’s practices bookkeeping is done by software applications such as Pascal. Although we acknowledge that there should be control over the legal qualifications of attorneys, the current way in which such qualifications are measured is totally ineffective and only serves to restrict competition”. Although most admit that the majority of South Africans cannot afford the high legal fees charged by attorneys, rules remain enforced that prohibits attorneys from providing their services at fees lower than those prescribed by the Law Societies. During 2003 the Association of Pretoria Attorneys had to pay a R223 000 fine to the Competition Commission following distribution of so-called tariff guidelines amongst its members. “Recommended fees operate against the public interest. Consumers must be allowed to choose between goods and services in a competitive economy – one important choice is price. Competition between suppliers charging the same fee is necessarily diminished” said Diane Terblanche, manager of the Enforcement and Exception division of the Commission. The Law Society rules contain various provisions that prohibit or limit advertising and marketing by attorneys. “These so-called touting prohibitions prevent the free flow of legal information, peer review and transparency. Attorneys are not allowed to criticise others and may not even publicise their successes in court. Although the ‘old school’ argues that these limitations are necessary to preserve high standards, such an argument is factually incorrect. These rules developed from pre-colonial custom and nothing more. An attorney that markets his or her firm surely cannot be deemed less professional or of lower standard then an attorney who does not? Bankers market themselves without any dire effects for standards in the banking sector” claims Buys. South Africa is an indirect signatory to the United Nation’s code on the “Basic Principles on the Role of Lawyers” that provide, amongst others, that no law shall deny free speech rights to any member of the legal profession. “Advertising, as a form of commercial speech, is guaranteed in the Constitution. There is truly no legitimate reasons why attorneys should be excluded from free speech rights. As far back as 1977 the US Supreme Court found against the Arizona Bar and ruled that limits on how attorneys market themselves are unconstitutional and cannot be justified in any way” says Buys. One alternative to escape the onerous limitations of the Law Societies is to operate as a “lawyers” in a legal consulting practice and not as attorneys. A few years ago attorney Edward Nathan & Friedland chose this route and was subsequently sold to Nedbank. Today, the firm falls outside the scope of the Law Societies and operate as corporate legal advisors. Michael Katz, current chairperson of Edward Nathan, was incidentally also the person who provided a legal opinion to the Law Society’s Standing Committee on Competition on applying for exemption from the Competition Commission. In response to a posting on the ‘Scrap The Attorneys Act’ blog that he should stop moaning and just leave the profession because nobody likes a whiner Buys laughs: “Other lawyers considered moaning and whining in their time included Mandela and Gandhi – although I will never be as bold as comparing myself to these two world heroes in any respect, they proved that moaning and whining by attorneys sometimes serve the greater good”. The blog is available at: http://scraptheattorneysact.blogspot.com