Law Society should explain truth of scenario

PUBLISHED : Tuesday, 09 November, 1999, 12:00am
UPDATED : Tuesday, 09 November, 1999, 12:00am

In a free market, prices are determined by forces of demand and supply. In Hong Kong, solicitors have a monopoly to handle sale and purchase of properties. Without government intervention, solicitors with the aid of the Law Society were able to charge conveyancing fees at levels unrelated to efforts or expertise by way of what was known as the compulsory scale fee system.

As well, the scale fee system had been blatantly undermined and abused.

Any property owner who bought a property within the past 20 years would have been told that there were law firms who were prepared to bypass the compulsory scale fee system. Many property owners actually benefited from it.

For reasons better known to itself, the Law Society has never disciplined any solicitor for non-compliance with the compulsory scale fee system.

Since the Government abolished the scale fee system not long ago, solicitors have been compelled to negotiate with clients on each conveyancing transaction, resulting in a downward pressure on fees to reflect prevailing market forces.

When the Hong Kong Housing Authority (otherwise known as the world's largest landlord) intended to seek legal services by a tendering method, the Law Society arranged a meeting with 86 law firms chosen by the Housing Authority in the pretext of discussing 'measures and yardsticks to ensure the quality of the services of the firms of solicitors to be selected'.

After the meeting and with the apparent support of all the law firms then attending, the Law Society wrote to all 86 law firms and 'recommended' a minimum charge of $3,500 per unit.

Why was the Law Society involved in this scheme when such a practice is likely to be regarded as a price-fixing scheme and is illegal in most developed economies? The Law Society argues 'recommendation' does not mean price-fixing. Is there any solicitor who would want to argue openly with the Law Society when it has wide power to discipline its members? The Law Society's attempt to disrupt market forces failed miserably. Its recommended $3,500 per unit was ignored. Instead, $888 is the median rate of the bidding fees submitted by 20 law firms.

The Housing Authority and members of the public will benefit from the competitive rate.

The Law Society then claims the result of the tender process 'proved' it did not attempt to fix prices.

A failed attempt does not mean the attempt did not exist. The attempt simply failed.

The latest episode on attempted price-fixing may lead to the unpalatable conclusion that the Law Society places the interests of its members before the interests of the public.

On the one hand, the Law Society might have been double-crossed by some of the 86 law firms who publicly supported $3,500 per unit but privately tendered for less in order to win the tender to work for the Housing Authority project.

In the public interest, the Law Society should explain which scenario is closer to the truth.