The Uncomfortable Commonality Between the North American Auto Industry and the Legal Profession

2014-06-14 14:10:34

auto.jpgHow can anyone even think there’s any commonality between or comparison to be made with the North American automotive manufacturing industry and the legal profession? And that goes to the core of one of the primary problems facing the legal profession today. Lawyers think that the legal profession is different and deserving of its self-regulated monopoly. They’re convinced the current revenue problems they’re facing are a malaise that will be overcome rather than an indication of a crisis that requires them to confront what is a fundamental paradigm shift from a seller driven practice of law to a client driven buyer legal services market.

Think back to 1965. The Detroit “Big Three”, GM, Ford and Chrysler, dominated the global auto market. They also dominated state and national political agendas dictating the policy and legislation on everything from safety, to federal funding for highways and even gasoline taxes. GM was arguably the largest corporation in the world. The slogan “What’s good for GM is good for America” was conventional wisdom.

In short, this was the formula for creating a “sellers” market. The “Big Three” designed and manufactured cars they wanted to sell, rather than what consumers wanted to buy. Pricing and marketing cars through a tight network of brand exclusive dealerships restricted buyers to paying the price for the cars that the “Big Three” decided to sell them. The cheapest way to produce a shoddy car and maximize profits was through giant factories using unskilled workers who had no loyalty to the company but were held captive by the lure of blue collar jobs requiring minimum education and training for which they were overpaid.

The year 1965 is prescient. Ralph Nader rose to fame that year with the publication of his expose “Unsafe at Any Speed”. Nader documented and made public what everyone knew; the “Big Three” were making exorbitant profits while producing shoddy cars that were endangering the public. The “Big Three” treated this as a short -term malaise. It would be back to business as usual once the obligatory apologies were made to Congressional committees for the attempted demonization of and character assassination attempts on Nader and they agreed to participate in powerless automotive safety committees.

Meanwhile two other cohorts had also taken notice of the dire condition of North American auto manufacturing. In the 1950’s an American statistician by the name of Walter Shewart had been encouraged by the U.S. government to journey to Japan to help its war torn devastated manufacturing sector get back on its feet. The folklore is now legendary of how he came upon a consortium of family owned bicycle and motorcycle companies and worked with them to develop the famous “Total Quality Management (TQM)” system of manufacturing. There was no money for high end R&D so they imported a finite number of American manufactured shoddy autos that Shewart had them dismantle as case studies on how mass manufacturing shouldn’t be done. They reassembled them using the famed TQM team model of quality production. The end result was a quality auto that consumers would want to buy at an attractive price.

By the 1960’s Germany had recovered from the devastation of its manufacturing base in World War II. The genius of German engineering had long ago perfected the art of manufacturing a quality utilitarian car with the launch of the ubiquitous Volkswagen (peoples car) in the 1030’s. Now that the country was up and running on full steam the famed German employer/employee partnership manufacturing model with its envied bench strength of highly skilled technical craftspeople nurtured through intensive bonding by school/corporate apprenticeships was looking for opportunities. They were confident there was a pent up buyers’ market in North America for precision manufactured true high performance luxury cars. Think BMW, Mercedes and Porsche.

Within 25 years by 1990 Japanese cars were the brands of first choice for consumers wanting to buy a quality car at an affordable price. BMW, Mercedes and Porsche were the must have brands for those who had the means and wanted the status of owning a luxury high performance car.

Fast-forward to 2014 and the two largest auto-manufacturing companies in the world are Toyota and Volkswagen (Porsche, Audi).

The “Big Three” are no more.

The commonality for comparison with the legal profession isn’t that the lawyers have also had a monopoly, albeit legislated and self-regulated, and have limited provision of legal services to a sellers market of the practice of law. It’s rather the “Nader” moment that occurred in 2005 in the UK. The stark opening statement below in what is popularly referred to as the “Clementi Report” was the culmination of a twenty year tussle between the U.K. government and the legal profession[1] replete with the perennial filing cabinet full of a plethora of green paper consultation reports and research studies.

 

The professional competence of lawyers is not in doubt. The caliber of many of our legal professionals is among the best in the world. But despite this, too many consumers are finding that they are not receiving a good or fair deal .[2]

The UK government acted quickly and decisively to transform the practice of law sellers market into a legal services buyers market. The passage of the Legal Services Act[3] placed control of legal services in an independent Legal Services Board (LSB). Any group of service providers that could demonstrate they had a professional education/training program in place to provide specified legal services to the public for which there was a demonstrated public need could be granted self-regulated status by the LSB with a license to hold themselves out as specified providers and held accountable accordingly. There are now seven self-regulated legal services providers in the UK. In short, legal services is now a robust buyers market in the UK and by all accounts the public is being well served by an entrepreneurial focused slate of legal services providers who are prospering.

The Canadian legal profession has taken a distinctly different backward step when confronted with its “Nader” moments. Rather than acknowledging that the public was signaling it wanted a buyers’ market for legal services by choosing at that time unlicensed paralegals over lawyers for specified legal services, the Law Society of Upper Canada misdiagnosed it as a malaise and successfully lobbied the government to bury them in the bowels of the law society by 2007 where a sellers’ market prevails. In 2013 the Law Society of British Columbia utilized the Ontario model as a mechanism to lobby the government to stamp out an historical buyers’ market for limited licensed legal services provided by notaries in an attempt to maintain a monopoly sellers’ market.

U.S. state bars have also tended to bury their heads in the sand when confronted with their “Nader” moments and have issued arcane ethics/policy decisions demonizing much in demand innovative electronic legal services provider such as Legal Zoom[4], Rocket Lawyer[5] and Nolo[6] as engaging in the “unauthorized practice of law”.

These new age legal services providers continue to thrive in a global electronic marketplace easily accessible by American consumers. To its credit the American Bar Association (ABA) is rising to the challenge in establishing an ABA 20/20 Commission[7] in 2009 and ABA Task Force on the Future of Legal Education[8] in 2013 that set the stage for transformation of the practice of law from a 19th century to a 21st century mode.


[1] Richard Abel, English Lawyers Between Market and State, (Oxford: Oxford University Press, 2003).

[2] The Future of Legal Services: Putting Consumers First, Presented to Parliament by the Secretary of State for Constitutional Affairs and Lord Chancellor by Command of Her Majesty, October 2005 at 7.

[7] www.americanbar.org/…/aba/…2020/20