Federal Trade Commission and Department of Justice Provide Comments on American Bar Association Proposed Model State Law Defining the Practice of Law

The Federal Trade Commission and the Department of Justices (DOJ) Antitrust Division on Friday released a joint letter urging the American Bar Association (ABA) to substantially narrow or reject a proposed model definition of the practice of law. If adopt

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According to the letter, signed by FTC Chairman Timothy J. Muris and Acting Assistant Attorney General for Antitrust R. Hewitt Pate, the proposed model definition would prevent non-lawyers from offering many of the services they currently provide. For example, it could be interpreted to prevent lay service providers from closing real estate loans; real estate agents from explaining the smoke detector or termite laws in their states; tenants’ associations from informing renters of their legal rights and responsibilities; and software makers from selling will-writing and other software. The proposed definition also could prohibit income tax preparers, accountants, investment bankers and other business planners from providing advice to their clients that includes information about various laws.

DOJ and FTC concluded in their letter that "the proposed definition is not in the public interest." The letter added, "By including overly broad presumptions of conduct considered to be the practice of law, the proposed Model Definition likely will reduce competition from non-lawyers. Consumers, in turn, will likely pay higher prices and face a smaller range of service options."

Separately, Muris noted, "The proposed definition could have a significant chilling effect on electronic commerce. Interactive Web sites that help consumers write their own legal documents might be found to be practicing law, and Internet-based lenders would likely find that they could not complete real estate or loan closings without hiring a local attorney in the state where the property is located."

Pate observed, "The proposed definition, if adopted by state governments, likely will increase prices for consumers in two ways. First, those who would not pay for a lawyer would be forced to do so, and, traditionally, lawyers charge more than lay providers for such services. Second, without competition from non-lawyers, lawyers’ fees are likely to increase."

As one example, Muris and Pate cited evidence showing that consumers’ costs are lower when non-lawyers compete with lawyers to close real estate deals. Evidence gathered by the New Jersey Supreme Court indicated that, in parts of the state where non-lawyer closings are prevalent, consumers paid on average more than $300 less for closings, even when represented by counsel.

The FTC and DOJ also expressed concern that the model definition likely would prevent consumers from benefitting from lay competition that may better suit their individual needs. For example, in the area of real estate closings, non-lawyers may offer to close loans at hours or locations that are more convenient for consumers. Likewise, consumers may choose to use will-making software because it is relatively easy and convenient to use.

The ABA’s Task Force on the Model Definition of the Practice of Law will hold hearings on the proposed definition on Friday, February 7, 2003, in Seattle as part of the ABA’s Midyear Meeting. The deadline for submitting written comments was December 20, 2002. The ABA informed the FTC and the DOJ that the Model Definition is a proposed statute, regulation, or court rule, and the agencies submitted their comments pursuant to that understanding.

The FTC vote to approve the letter for submission to the ABA was 5-0. The DOJ independently made its decision about approving the letter. For more information on the letter at the U.S. Department of Justice, contact Renata B. Hesse, Chief, Networks and Technology Section, at 202/307-6200. For more information on the letter at the FTC, contact Jerry Ellig, Office of Policy Planning, 202-326-3528.

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