More and more attorneys are recruiting clients through “lead generators.” The Bar Association has announced an offensive against this way of working. There will be a “repentance” scheme for lawyers who disclose. The Order’s approach leads to questions of principle about how lead generators work, a young industry in which a lot of money is involved.
How lead generators work
Have you ever Googled the word “lawyer”? Thus, more and more people are beginning their search for a suitable lawyer. The first three hits on Google are not a law firm website at all. They are websites of companies that recruit business for lawyers. These entrepreneurs have a background in search engine marketing (SEO). They build a site and buy visibility from Google. Behind the site is a back office: a call center with a 0900 number or even a chat, which makes the first contact with the client. The operator then creates a “lead,” a referral of the case to an affiliated attorney. This attorney pays a fee to the lead generator and thus extracts business from the market. One time a worthless blooper, the next a well-paying business; all in the game.
Conduct Rule 2(2)
“A lawyer is not permitted to award or receive any remuneration or commission for bringing in assignments.” According to the Order, not just a rule of conduct, but a core value, which applies throughout Europe. The rule dates back to a time when there was no Internet. Lead generators have quickly gained a foothold in the marketplace and a substantial number of lawyers have joined them, although it is immediately clear that paying a fee to an outside firm for recruiting and referring clients is at least at odds with Rule of Conduct 2.
How lead generators work
Lead generators don’t all work the same way. Some lead generators charge a fee per lead. The Bar Association states, “cases in which the rate depends on the number of leads are considered contrary to Rule of Conduct 2(2).” So the Order goes in with its leg stretched out and the fate of this type of lead generator seems sealed. If the Bar Association cracked down on participating lawyers, this revenue model would soon be over. But there are also lead generators that are more like a buying combination of ad space. These lead generators charge a flat fee to participants. The relationship between the number of leads delivered and the fee is indirect. These concepts are well defended. The Bar Association therefore gives some leeway here: “a subscription rate is in principle not allowed (…) unless the attorney at law demonstrates that the rate is reasonable.” In the coming months it will have to become clear which constructions are acceptable and which are not. It has been seen before in the personal injury legal profession, where the no cure no pay prohibition is squarely in place; some confrères successfully circumvent this prohibition through a foundation, governed by family members of the personal injury lawyer. You can guess who will get rich from such a foundation that only takes on promising cases on a no cure no pay basis. Somewhere there is a boundary, but in the case of Conduct Rule 2(2) it is not yet entirely clear where exactly.
Deployment of disciplinary law
The Amsterdam Bar Association announced in a newsletter on January 12 that lawyers may report unauthorized collaborations between the Bar and lead generators until April 4, 2016. Providing information indemnifies against the use of disciplinary law. Implicitly, it announces that enforcement action will be taken after this date. The legal profession has not seen this method of working on this scale before. The Bar Association is playing it smart and hard; many offices will expose themselves, providing the Bar Association with information (such as the contracts) that can be used against offices that do not use the disclosure rule. Most lead generators have a site that shows which firms or attorneys are affiliated. Detection of these “offenders” is not too difficult. But there may also be offices that do not immediately succumb to the pressure of the Order. The real test will follow when the dean meets with these lawyers in disciplinary court. Lead generators work in different ways, and it is not a foregone conclusion that any form is unauthorized. The judgment on this issue rests with the disciplinary judge and not with the dean’s office. Advertising on the Internet is per se permitted. It is foreseeable that the smarter lead generators will “Order-proof” their way of working by converting themselves into cooperative advertisers, if they are not already.
Anti-competitive
Why is the Order cracking down on lead generators? According to the Order, the issue is maintaining independence. This is perhaps a bit strong-minded. If a lawyer pays €125 for filing a divorce, it does not mean that the lawyer loses his independence from the client or from the lead generator. Perhaps the Order’s approach also has to do with guarding the traditional values of the profession in this age of digital disruption. The digital world has winners and losers. The lead generators are not as relevant to the South Axis and the larger offices, nor to the marginalized small, purely social offices. The battle rages between offices positioned in the middle. They handle both additions and paying cases, and have an interest in increasing the number of paying cases. Lead generators sift for them the cherry on the cake. Lucrative business is filtered out of the market, the not-so-interesting business is left for offices that miss the boat. The similarity to the no cure-no pay ban comes to mind. The “ambulance chasers” also have few friends at the Order. By the way, the government is not getting off scot-free. Addendum fees have become so low that many firms that want to be socially responsible in their own right have been forced to say goodbye to pro bono work. The tragedy is that little is left for the shrinking group of lawyers who are willing to take additions but also need paying cases to compensate for the underpayment. The responsible backbone of the legal profession is struggling. In family practice, there is no dry bread to be made from additions. The overall picture is that competition is getting tougher. This is not only due to the lead generators, but also to the government that has no money to spare for a sound system of funded legal aid.
Supervisor
The announced action reflects that since the introduction of the new Lawyers Act on January 1, 2015, the Bar Association is increasingly developing into a proactive regulator that does not shy away from enforcement action. In the past, the Bar Association’s attitude was more reactive: action was taken only after a complaint or after concrete signals. The use of a dean’s objection (a complaint by the dean against a lawyer regulated by the Lawyers’ Act) has long been a rarity, but the Bar Association will need to use this tool to take action against lawyers who work with lead generators, because clients are not so likely to complain about this issue. Chances are they are satisfied in themselves with the lawyer who solved their problem. The clients are not bothered by lead generators. This development typifies the evolution of the Bar Association from professional association to regulator; the Bar Association will increasingly take action against law firms without a concrete complaint from a disgruntled client being the trigger.
Interested in this topic? Also read this:
“why lead generators suck“
Posted by Marius Hupkes
Marius Hupkes is an attorney and former clerk of the Board of Discipline.
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