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Unauthorized Practice - An Antitrust Perspective

Over the years, this column has discussed how high fees were pricing low and moderate individuals out of the market for legal services and how technology might help ameliorate this situation. In January 2016, this column discussed the 2015 U.S. Supreme Court case of North Carolina Board of Dental Examiners v. FTC, which holds that a state regulatory board is subject to the antitrust provisions of the Sherman Act if the board members are active participants in the industry regulated by the board. These seemingly disparate elements came together in the context of the conflict between Inc. and the North Carolina State Bar over whether LegalZoom’s web-based services were the practice of law.

LegalZoom and the North Carolina Bar had been at odds over whether LegalZoom’s activities were the unauthorized practice of law in North Carolina. Following the decision in North Carolina Board of Dental Examiners v. FTC, LegalZoom sued the North Carolina State Bar for damages for “unlawful monopolization” under the Sherman Act. This suit prompted a settlement between the State Bar and LegalZoom under which, in part, the parties agreed to support legislation amending the definition of the “practice of law” to exclude the “operation of a Web site by a provider that offers consumers access to interactive software that generates a legal document based on the consumer’s answers to questions presented by the software.” Certain consumer protections were also to be included. The enabling legislation was in the form of North Carolina House Bill 436.

On June 10, 2016, the staffs of the Federal Trade Commission and the Antitrust Division of the Department of Justice sent a joint letter to the North Carolina State Senate supporting House Bill 436 and sharing their views on the definition of the practice of law. While not directly applicable to Illinois, the letter shows trends in current thinking.

The letter states that there is “a well-known crisis in access to legal services for millions of American consumers, especially for low- and middle-income people. Surveys have repeatedly shown that many low- and middle-income Americans cannot afford the services of a licensed attorney, despite a generally increasing number of lawyers. This seeming paradox of unmet legal needs and an abundance of lawyers continues to persist.”

The letter also states - as a general principle - that the “staff believe that ‘the practice of law’ should mean activities for which specialized legal knowledge and training is demonstrably necessary to protect consumers and an attorney-client relationship is present. Overbroad scope-of-practice and unauthorized-practice-of-law policies can restrict competition between licensed attorneys and non-attorney providers of legal services, increasing the prices consumers much pay for legal services, and reducing consumers’ choices.”

Of course, there is the countervailing issue of consumer protection and “[t]he Agencies recognize that licensing requirements and scope-of-practice policies can have valid consumer protection justifications. Some circumstances and tasks require the knowledge and skill of a person trained in the law. Policies to protect consumers in such situations are legitimate.”
Where does this leave the organized bar – and the individual lawyer? First, we must now add anti-trust issues when considering the problem of access to law. The bar must use common sense on when to assert the issue of unauthorized practice. Merely because a person provides a service that involves the application of the law does not necessarily mean that the person is practicing law. As the letter states, we must ask whether there is the application of specialized legal knowledge and whether an attorney-client relationship exists. As individual practitioners, we must recognize that there will be downward pressure on business in those areas of the practice than can be adequately provided by trained para-professionals or smart computer programs.