The process of democracy took place during the last Malaysian Bar annual general assembly on Oct 22, 2005, and the majority of members present wanted the no-discount rule to stay. I respect this.

However, short of being called a soothsayer, I would like to forewarn my brothers and sisters in the fraternity that the natural law of free market will catch-up with us anytime and the abolition of the no-discount rule is imminent.

We should endeavour to adapt to the market forces rather than try to escape them. The reasons are as follows.

Antitrust

The no-discount rule is viewed as 'mercenary' by consumers. In the US, they have antitrust laws to combat monopolies and professional associations are not exempted . Antitrust is defined by the Merriam-Webster dictionary to be "consisting of laws to protect trade and commerce from unlawful restraints and monopolies or unfair business practices." Basically, such protectionism would be illegal in the US. Antitrust laws are promulgated to protect competition. Antitrust laws are to protect consumers and competition.

The Supreme Court in the case of Goldfarb v Virginia State Bar, 421 U.S. 773 (1975) held that a minimum fee schedule for attorneys, published by the county bar association and enforced by the state bar association, was price fixing in violation of Section 1 of the Sherman Act. The court held that "the schedule and its enforcement mechanism constitute price fixing since the record shows that the schedule, rather than being purely advisory, operated as a fixed, rigid price floor. The fee schedule was enforced through the prospect of professional discipline by the State Bar, by reason of attorneys' desire to comply with announced professional norms, and by the assurance that other lawyers would not compete by underbidding .

Consumerism

Legal practice is a business. Consumers benefit from free and open competition by ensuring lower prices and better products. It is only fair that in a freely competitive market, each competing business or firm shall attract consumers by giving discounts and increasing the quality of its product or services. Competition can also stimulate businesses or firms to discover new, innovative and more efficient methods of providing services. Inefficient firms that fail to understand or react to consumer needs may soon find themselves losing out in the competitive battle. When competitors agree to fix fees and not allow discounts, consumers lose the benefits of competition. This results in monopoly and complacency.

Many fellow practitioners are slow to admit to the fact that legal practice is a business because they equate business with unprofessionalism and unscrupulous practices. Well, it is time for a paradigm shift. Why can't business be synonymous with professionalism and ethical practices? We can make a difference if we want to. Gone are the ivory tower days. No more 'hoity-toity' days. With 12,000 lawyers, legal practice as a business is here to stay.

Here we are complaining about the New Economic Policy and Approved Permits and then accord the same kind of crutch-like protectionism to ourselves. I sensed fear among members of the Bar of losing the protection accorded to them. This is not healthy because it is a manifestation of one's weakness, not resolve.

When I say competition, I mean fees and quality of service as well. Lawyers should have more faith in the forces of economics (supply and demand etc). If lawyers want to undercut, they cannot do so forever at a loss. Those who do so, cannot sustain the loss-making endeavour forever. However, if one firm can achieve a low rate without a loss, then other firms should look to it to see how it can meet the efficiency standards of the undercutting law firm. Therefore, competition is good. At the end of the day, conveyancers should also realise that the conveyancing market is a shrinking or dying one. Conveyancing is a sunset practice. It cannot continue to be a licence to print money forever. If we begin to realise this then perhaps we shall shift our focus to something more profitable i.e. more cutting edge legal work. Ultimately, emerging markets will make the legal market in Malaysia progress and ultimately perhaps become regionally or even globally competitive.

Even the Real Estate and Housing Developers' Association (REHDA) is against the no-discount rule. REHDA's press release issued by its president, Jeffrey Ng Tiong Lip on Nov 2, 2004 was a direct attack on the no-discount rule. REHDA was of the view that rule in the SRO (Solicitors Remuneration Order) is counterproductive and not beneficial to the public. REHDA requested the Bar Council to reassess the impact of the rule and adopt a market-driven approach for the well being of consumers and members of the legal fraternity.

Paymasters

My fellow practitioners have argued that the last thing that the Bar Council needs is the advice of REHDA as they are the ones trying to control conveyancing charges by absorbing legal costs into their sale price. My point is that despite their (REHDA and/or the consumers) flaws, they are our paymasters and we are free to reject their unreasonable proposals if we are not happy with their so-called benchmark fees. As for those lawyers who managed to stay on the developer's panel although making a loss or a fraction of what we are supposed to be paid, I salute them for being able to stay afloat. There must be some form of supreme and efficient fund management on their part. We should learn from them.

The 11th Annual Meeting of the Building Industry Presidents' Council (BIPC) was held on June 22, 2005 and chaired by Eddy Chen Lok Loi, with representatives from the REHDA, Master Builders' Association Malaysia (MBAM), Association of Consulting Engineers Malaysia (ACEM), Institution of Engineers Malaysia (IEM) and Pertubuhan Arkitek Malaysia (PAM).

The meeting identified inter alia, that the no-discount rule for legal fees is not based on market competitiveness.

The restriction on providing discounts is damaging to house buyers as they will have to bear the burden. The majority of primary housing transactions fall under the purview of the Housing Development (Control & Licensing) Act 1966, which prescribes a standard Sale and Purchase Agreement (SPA) where no amendments or variations are allowed except for the particulars of the transacted property. The degree of repetitive work brings about savings to the solicitor in terms of time and effort. Such savings should be shared with the house buyers.

Fear no competition

Sooner or later pressure and/or consumer groups like the above would gang up and petition to the government to abolish the no-discount rule. My suggestion is that we should act before they do so. I feel that we should learn from the experience in England (abolished in 1972), Australia (abolished in1991) and Singapore (abolished in 2003), where the scale fee is abolished. There was pressure from their REHDA equivalent; consumer groups etc and also the government to abolish the scale fees, in order to promote competition.

This I fear is the foreseeable future for our legal profession. Discontentment breeds action. I must say that the conveyancing scene is quite different in Singapore as most of the properties are government-controlled HDB flats. However, I propose that instead of abolishing the scale fees, we should retain the scale fees and abolish the no-discount rule by allowing a maximum discount of 35 percent. This is a middle path in order to circumvent the problems created by a free-for-all situation.

One may argue that it is oxymoronic or superfluous to maintain the scale fees and abolish the no-discount rule. I beg to differ. I opine that by maintaining the scale fees, we at least have a benchmark to guide us. In fact, it is high time to increase the scale fees. It is in the public and consumer's interests that the scale fees should mark the upper ceiling beyond which a client should not be charged rather than the level below which the clients cannot benefit from discounts.

The abolition of the no-discount rule can lend credence to the Bar that we respect market force and we are not afraid of competition. The proviso is that we shall not compromise our services in lieu of low fees and our integrity and professionalism are still intact.

Part 2 tomorrow