Distribution, Competition, and Antitrust / Intellectual Property (IP) Law

Are Bar Associations Anti-Competitive?

English: Title page of Adam Smith's Wealth of ...

Title page of Adam Smith’s Wealth of Nations, 1776. (Photo credit: Wikipedia)

From the abstract of a recent paper (via Antitrust & Competition Policy Blog):

 

The European Commission Report on Competition in Professional Services found that recommended prices by professional bodies have a significant negative effect on competition since they may facilitate the coordination of prices between service providers and/or mislead consumers about reasonable price levels. Professional associations argue, first, that a fee schedule may help their members to properly calculate the cost of services avoiding excessive charges and reducing consumers’ searching costs and, second, that recommended prices are very useful for cost appraisal if a litigant is condemned to pay the legal expenses of the opposing party. Thus, recommended fee schedules could be justified to some extent if they represented the cost of providing the services. We test this hypothesis using cross-section data on a subset of recommended prices by 52 Spanish bar associations and cost data on their territorial jurisdictions. Our empirical results indicate that prices recommended by bar associations are unrelated to the cost of legal services and therefore we conclude that recommended prices have merely an anticompetitive effect.

Aitor Ciarreta (Universidad del Pais Vasco), Maria Paz Espinosa (Universidad del Pais Vasco) and Aitor Zurimendi (Universidad del Pais Vasco), Are Bar Associations Anticompetitive? An Empirical Analysis of Recommended Prices for Legal Services in Spain.  This recalls Adam Smith’s famous statement in The Wealth of Nations: “People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.”  Of course, recommended prices — in a vertical distribution situation — are perfectly lawful.  But where a bar association is involved, there are horizontal (or possibly horizontal) aspects to the arrangement.  Cf. Goldfarb v. Virginia State Bar, 421 U.S. 773 (1975) (minimum-fee schedule for lawyers published by the Fairfax County Bar Association not immune from the Sherman Act); Arizona v. Maricopa County Medical Soc., 457 U.S. 332 (1982) (maximum physicians’ fee schedule violated the antitrust laws).

 

No doubt there is a current oversupply of lawyers.  However, the better way to address concerns about fees is to (lawfully) reduce the supply.  See this blog post, for example.

 

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Comments

  1. Very relevant to a local situation…..will make use of cases sighted thanks!

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