IRISH CASE STUDY:
Chapter 4: Government in the Mixed Economy

Advertising Regulations in the Solicitor Profession
by Edward Shinnick, Department of Economics, University College Cork.

This case focuses on the regulation of the solicitor profession in Ireland. Specifically, issues relating to advertising by solicitors are covered and this is directly relevant to the issues covered in chapter 4. Such issues include regulation, government intervention and market failure.

In a competitive market, many firms act in their own interests by making independent decisions regarding investment, output and prices. However, this private decision-making is not always compatible with the interests of the public in general. For example, freedom to earn monopoly profits and to impede competition generally tends not to be regarded as being in the public interest. This inherent conflict has led to the regulation of industries, where guidelines and explicit rules govern firm conduct.

In the context of the solicitor profession, such rules are to be found in relation to solicitor advertising. Over the past 10 years four separate pieces of legislation dealing with solicitor advertising have been introduced by the government. The rationale for this legislation centres around the issue of market failure.

In the market for solicitor services, market failure may occur due to, for example, lack of full information on the part of consumers or abuses of monopoly power by suppliers. This market failure can arise due, in part, to the nature of professional services. Such services are often complex, requiring specialised training for suppliers, and, therefore, consumers may find it difficult to judge the quality of the service provided by the solicitor. Consequently consumers are open to potential abuse in the sense that they may pay for a service that is not of an adequate 'quality'. An example might be a customer who pays for the conveyance of a house and finds out only when they try to sell their house that the conveyance was not correctly carried out and they do not have the title to their home.

Legislative measures to reduce the possibility of market failure began in earnest with the Solicitors' (Advertising) Regulations, in 1988. Prior to this solicitors were forbidden to advertise their services or to do anything that may be regarded as touting for business. To do so was considered as 'unprofessional' and would bring the profession into disrepute, according to their self appointed regulator the Law Society. With the introduction of the 1988 regulations, solicitors were permitted to advertise their services in any media they thought fit but were still forbidden from specifying a fee for any service. Solicitors are still prohibited from carrying out their practice in any way that may reasonably be regarded as touting or as attracting business unfairly.

Section 69 of the Solicitors' (Amendment) Bill, 1994 went further than the 1988 regulations and allowed solicitors to advertise their fees. These two pieces of legislation were an attempt by the government to curb any market failure brought about by the lack of information on the part of consumers. The idea was that by allowing solicitors to advertise their services and their fees, consumers would know the variety of prices charged by the different suppliers, allowing them to make comparisons across firms' services. This knowledge would then make it difficult for solicitors to charge fees that were above the average in the market, that is large price dispersions would not exist.

However, the next two pieces of legislation sought, once again to place restrictions on solicitor advertising. The Solicitor (Advertising) Regulations, 1996 were introduced to curb misleading advertising. Such advertising centred around the 'no win no fee' claim made by some solicitors which states that clients would only have to pay fees if they won their civil actions for damages. The employers' organisation IBEC and the insurance industry maintained that these claims made by solicitors contributed to a 'compensation culture'. The 1996 legislation stipulated that solicitors had to advise their clients that they could be liable for costs and expenses awarded against them by the courts if they lost their case.

In addition, the Solicitors' (Amendment) Bill, 1998 prohibited advertising, directly or indirectly, referring to claims for damages for personal injury. This Bill was a response to concerns regarding the effectiveness of the existing controls as a result, in particular, of the army deafness claims. The belief was that 'ambulance chasing' was responsible for the increase in the volume of personal injury claims over the past 10 years and this brought the solicitor profession into disrepute.