Commercial pressure on solicitors to use connected suppliers

Following on from the discussion/expose of estate agent “conditional selling” kicked off by Mtge
Broker Malcolm Davidson of Moneyman Mortgage Brokers on LinkedIn, how about this for an
example of unethical cross selling by IT suppliers in conveyancing …


My firm’s case management and accounts software supplier (S1) has just told us the price of the
firm’s annual licence is increasing from £8,220 to £11,880 – a 44.5% increase.


However, if we agree to buy all our conveyancing searches from an S1 subsidiary, (S2), the annual
fee will remain unchanged at £8,220. The minimum stipulated conveyancing search spend is
£11,520, 80% of this years’ conveyancing search spend.

Drawbacks

  1. anti-competitive – it stops us shopping around for a more competitive supplier, whether on
    price or service
  2. exposure to risk of uncontrolled search price increases because we are a captive market
  3. service from S2 is likely to diminish – no competition
  4. reputational damage/breach of SRA principles – if I choose to use S2 it will be because it
    reduces my overhead costs by £3,660, not because it is in the best interests of my clients. I will
    derive financial benefit; the clients will take the consequences and be none the wiser.

What is it?

Is this a “secret commission” aka a bribe? Or is it just a “good deal”? Does it make a difference
that I am a solicitor? Would it be different if I were a procurement executive for ABC Ltd, and not
a lawyer?

Is S1 no better than Countrywide cross selling its connected businesses through its network of
estate agents employing conditional selling tactics?

Perhaps I am being over scrupulous? Is it in my clients’ bests interests to take the opportunity to
reduce our overheads and keep down costs, helping build up the S2’s business? But what about
the wider impact, competition, and the smaller providers? With financial inducements like this the
competition will go to the wall and then what will be the impact on prices?

Digital and conveyancing

Thinking about the Digital Property Market Steering Group DPMSG, I can’t help predicting digital
providers will crowd in to improve the experience of home buying and will behave just like S1.
Once S1 got a foot in the door it hunted out opportunity. It is now exploiting our dependency
and buying our loyalty to build S2, its other business. In so doing it gets more and more influence
in conveyancing and may come to dominate the market.

Is this practice rife? First time anyone has tried it on me. Who might be interested in this?

Competition

The Competition and Markets Authority required Dye & Durham to sell TM Group in 2022
because after investigation it identified competition concerns:


https://www.gov.uk/government/news/cma-requires-dye-durham-to-sell-tm-group


The CMA ultimately ordered Dye & Durham to sell TM Group, having bought it for £91.5m. Its
press release of 3 August 2022 said:


“The CMA has therefore concluded that the merger would reduce competition and could lead to
less innovation, higher prices and lower quality services in the market. This could mean a worse
deal for people and businesses buying or selling residential and commercial properties in
England and Wales.”


The same could be said about my software supplier’s proposal.

Notable Replies

  1. Avatar for Zahrah Zahrah says:

    Is this not similar to a certain software provider that has the same parent company? (you take the case management system and search provider because it “integrates” - supposed to make life easier for the conveyancer as everything drops back in to the case management system + then they try to sell you a CRM tool for additional fees to “manage your pipeline”)

    That particular company will not allow/host other fantastic products/collaboration (unless it is to their advantage) so it makes life a little ‘harder’ for conveyancers as we then have to ask the client to log into different platforms if we want a separate Source of Funds tool (or indeed any other ‘tool’ to add to our kit).

    Said company charges firms with higher transaction volumes way cheaper than smaller firms with smaller volumes. (And by cheaper I mean £2 for an AP1 for one firm and £6 for an AP1 for another firm) The tech is there but so is the greed. If they priced it better, more people would use it.

  2. Avatar for Colin Colin says:

    Lawtech is becoming a serious issue. Lawyers, in an effort to outcompete other lawyers, keep feeding the beast and we are finding that the political capital and influence of lawtech providers - who have no scruples in using their wealth to finance lobbyists can now steer the profession in a way that suits them and aids their bottom line.

    I will offer one small example, in terms of AML the ‘gold standard’ for verifying a client’s ID used to be meeting them in person and seeing their original ID documents. Lawyers are increasingly being told that this isn’t enough however - they need to supplement with sanctions, PEP and other checks. A job that we therefore used to be able to do for free now requires the use of third party technology.

  3. Avatar for Zahrah Zahrah says:

    I understand the second bit - electronic is required because lawyers aren’t trained to detect fakes, but the electronic verification can read digital chips in passports/driving licences. Problem is that if the client doesn’t have the latest device to do this or uses a web cam instead of an iPhone/Android then we are not going to meet the HMLR Safeharbour standard (which is our ‘get out of jail free’ card!)

  4. Avatar for Colin Colin says:

    Mission creep, Zahrah. You are right that lawyers aren’t trained to be experts in spotting fake documents, but realistically speaking, how many fraudsters or money launderers meet the lawyer in person with a fraudulent passport and proof of address? I would suggest that doesn’t happen very often, if at all.

    HMLR are as ‘in bed’ with lawtech as anyone else.

  5. Avatar for Zahrah Zahrah says:

    It has happened (believe it or not) - did you not watch that ITV drama where the chap lost his house as a fake couple pretended they owned the property and went into the solicitors office to sign the paperwork? (Office looked like it was from the 1980s with the metal filing cabinet). The fraudsters are also getting more sophisticated and I saw something which showed how they could meet the ‘liveness’ test using a fake cardboard cut out.

    None of us are safe . . . we will all have to have digital chips implanted on birth to prevent this!

  6. Avatar for Colin Colin says:

    I have heard about bypassing the liveness test. Easily done in the days of deepfakes.

    Nothing wrong with a metal filing cabinet :face_with_peeking_eye:

  7. Some of us still use paper files @Zahrah

    Indeed I do have a metal cabinet behind me with my files.

    I believe lender panels and insurers do insist on “fire proof” storage where there are any deeds or documents held.

  8. airtag your children

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