The Competition Appeals Tribunal (“CAT”) has found that the Law Society acted illegally by entering into anti-competitive agreements and abusing its dominant position in the market for providing quality certifications and accreditations to conveyancing firms in England and Wales. Socrates Training, an online educational service providing training including anti-money laundering and anti-property fraud, had brought the case, claiming that the Law Society’s requirement that in order to remain accredited, solicitors had to purchase the Law Society’s own training programme, the Conveyancing Quality Scheme (“CQS”), was abusive conduct that stopped competitors from providing similar services. The CAT agreed with Socrates’ view and found that the Law Society had abused its dominant position to the detriment of competitors and the conveyancing firms that used its services. The CAT has required the Law Society to cease its behaviour and will consider the issue of quantum of costs and damages for Socrates at a later date.
This case is the first claim to use the “fast track” procedure, which came into force in October 2015. The procedure allows smaller companies to file claims, and then, on the basis that they are not overly complex, the CAT will aim to hold the trial within six months. Here, the claim was brought in April 2016 and the trial held in November 2016. Given that this claim involved market dominance and abusive conduct, which are notoriously complicated and often heavily evidence based, it is surprising that this case was deemed suitable for the procedure. Notwithstanding this, the CAT found that from April 2015, the Law Society’s mandatory requirement that solicitors had to purchase its own course for accreditation purposes amounted to abusive conduct. The Law Society had illegally tied both the training requirement and the accreditation elements, and the accreditation became a “must-have” for a large number of solicitors. The extent of the Law Society’s dominance on the accreditation market, combined with the inability of any other supplier to provide a competing scheme, meant that firms had no choice of training provider once they decided to become accredited. Competition was appreciably distorted by the requirements, in breach of Chapter 2 of the Competition Act 1998 (“CA98”). The CAT also found that the agreements between the Law Society and the law firms that became CQS accredited appreciably restricted competition in breach of Chapter 1 CA98.
The Law Society sought to argue that the requirement to obtain the training courses exclusively from the Law Society was objectively necessary and proportionate, as they were valuable to those clients that deemed accreditation important. This was rejected as the issue was not the provision of training per se, but whether the accreditation was justifiably reliant on the provision of training via only the Law Society’s modules. The CAT found that there were reasonable alternatives to the Law Society’s training courses, the requirement of mandatory Law Society training was not indispensable to the objectives the Law Society were seeking to achieve and as a result the Law Society’s conduct and requirements were unjustified.
The success of Socrates and the finding that the Law Society has behaved illegally will be highly embarrassing to the body that represents solicitors in England and Wales. Not only will the Law Society likely have to pay damages and costs to Socrates, but it will now have to rethink its ability to finance itself via the CQS. Given that over 1.5million per annum came from this training programme, the Law Society may now find that its training programme is not as profitable as it once was. Indeed, the Law Society has confirmed that it is ceasing sale of the CQS with immediate effect, and will be considering its options in this regard.
In addition, it’s worth noting that the CAT found that elements of the Law Society’s evidence in relation to the profitability of the CQS was “wholly unsatisfactory”. At the trial, the Law Society had told the CAT that 41% of its training income was related to the CQS; however, upon being challenged on this by Socrates, the Law Society admitted that, as a result of poor recording procedures, the true figure obtained from the training process was closer to 90%. At the time, the CAT called the discrepancy “shoddy” and said that the Law Society “should not have presented what they have in a misleading way”. In response to the Judgment, the Law Society has said that it is grateful for the CAT’s guidance in relation to the CQS, that it had withdrawn the training modules with immediate effect and would be taking steps to ensure that similar issues do not arise in future.