Legal Barriers to Innovation: The Growing Economic Cost of Professional Control over Corporate Legal Markets

"4 Twenty years ago David Luban called for the deregulation of routine legal services (such as completion of forms, drafting and probating of wills, uncontested divorces) and argued that the attorney-client privilege and related duties of confidentiality (a lynchpin of the bar's justification for key elements of its regulatory regime) were not justified in the organizational (corporate) context.5 In a careful history of regulation of the unauthorized practice of law (UPL) completed for the American Bar Foundation in 1980, Barlow Christensen reached the "shocking" conclusion that UPL restrictions were no longer defensible.6 David Wilkins raised serious questions in 1992 about the validity of the bar's defense of selfregulation based on professional independence and unique bar expertise to judge lawyers' conduct.7 Anthony Kronman saw no hope for the recovery of lawyerly ideals through self-regulation in the face of modern corporate legal practice in his plaint for the "lost lawyer" in 1993: any lawyer seeking those ideals has no alternative, he counseled, than to "stay clear of the ... large-firm practice. In 2000, the Organization for Economic Cooperation and Development (OECD) published a report evaluating the impact of professional regulation (including the regulation of lawyers) on competition and economic welfare.121 In 2001, the U.K. Office of Fair Trading (responsible for competition law and enforcement) issued a similar report evaluating the competitive effects of professional regulation by the law societies and concluded that the restrictions on the ownership and structure of legal services providers were excessive.122 This report triggered a responsive report on competition issues in the regulation of legal practice by the Lord Chancellor,123 as well as the Clementi Report,124 upon which the Legal Services Act of 2007 was based and which provides explicitly for the application of competition law to the conduct of professional bodies of lawyers.125 Assessments in the United Kingdom and the OECD were followed by studies at the European Commission, which has signaled clearly that competition laws will be applied to the regulatory limitations placed on the practice of law.126 As against the murky, fragmented, and self-interested responsibility for policy resting with individual state courts and bar associations, the absence of national policymaking and the lack of antitrust enforcement in recent years in the United States, the United Kingdom, and emerg