This is from the ABA Journal:
[Robert Grant] Niznik’s graduation musings led him to contemplate the plight of indebted law students struggling to find a job in a bleak economic climate as well as the expensive and largely inaccessible nature of the legal profession. His answer to both issues is at once goofy and serious. The New York Law School student founded Shpoonkle, a playfully named website that allows attorneys and law firms to bid on legal requests submitted by clients. The service is free for now, but Niznik said attorneys may be charged membership fees in the future."Shpoonkle" is a horrible, horrible name, and I think there are numerous potential pitfalls that have to be overcome (e.g., the clients' incentives to lie seems higher than if they're in a one-on-one initial consultation, and if the lawyer's aren't allowed to ask questions before bidding, I could see the site becoming a platform for misrepresentation). However, the fact that people are developing such technologies should surprise no one, and I think this is a positive sign that the real dangers of lawyer oversupply may become present.
By way of example, I'd like to discuss the sports card market's collapse in the early 90s. For example, in 1990-1993, a Ryne Sandberg 1993 Topps rookie card was "worth" approximately $35-40 in mint condition according to price guides that monitored the market. By the late '90s, the price had dropped dramatically (to $15 or so) and today - even after Sandberg has been inducted into the Hall of Fame - one can buy a Sandberg rookie card for about $4.00 on eBay. Sandberg's career trajectory cannot explain that by itself, as the same phenomenon can be witnessed in the value of other cards from the 70s, 80s, and 90s (e.g., this card once went for $100+). Factoring in inflation, that's a major collapse.
Why did it happen? The initial knee-jerk reaction might be that the strike of 1994 and the steroid era forever ruined baseball's popularity. But the same effect can be seen in other sports as well (see this, for example). Rather, what happened in the mid-90s was that the development of the internet (specifically eBay) destroyed the supply/demand illusion that previously dictated prices. See, prior to eBay, sports card values were set by price guides (like Beckett), who purported to monitor sales. People involved in private one-on-one transactions had no idea what the true supply of these cards was, and often the demand was overstated; such is very easy to do with there is limited information about the supply and demand of an object.
When eBay came around, it destroyed that market illusion by showing the market that the supply was much greater than anyone thought and the demand was actually much lower than anyone thought. It provided a superior means of determining supply and demand (ergo price), ultimately benefiting consumers at the expense of those who had been stockpiling sports cards on the false belief that these things would be valuable at some point in the future.
Now apply to law. What does good legal representation cost? Aside for the more "routine" services (simple chapter 7, llc drafting, basic real estate transactions, etc.), no one has a damned clue. Indeed, the ambiguity involved in legal representation - the fear that lawyer costs may skyrocket - inhibits a lot of people from seeking attorney aid. And when someone sits down with a lawyer in a one-on-one setting after a consultation, the potential client lacks any power to bargain if the lawyer says his services cost $200.00 an hour.
This set-up is a market illusion, just as the baseball card market was before eBay. The consumer (client) has no idea what the actual supply of legal services is. The lawyer is thus in a superior position to argue that his particular services are in high demand and short supply, even if they aren't.
If there were a reverse auction site set-up - not just this Shpoonkle thing, but also LawyerBid is in the game - prices for everything worth taking except the most complex litigation will drop. Why? Because lawyers are a competitive bunch and there are more licenses floating around than are necessary to service the current demand for legal services. People are, overall, cheapskates. If one barred lawyer can represent someone for half the price of another - and the individual can see the cost savings in black-and-white - that consumer isn't going to care who went to Harvard and who went to Cooley.
This is the nation of Wal-Mart and McDonalds. Prestige has nothing on cost savings, and not even Fortune 500 companies will turn down lower legal fees if they're clearly being overcharged. Right now, there's a market illusion that keeps people from seeing that they're being overcharged. If an auction site were set up, that illusion is gone.
This, of course, would be great for notions of "justice" and providing access to new parties, but, you see, the people at the high end are obviously worried. Or just ethically-minded attorneys in general. From Simple Justice:
By no means does the need for money make this a justifiable mechanism. It is anathema to what the legal profession is supposed to stand for, implicates a wide variety of unpleasant ethical considerations and reflects a further step, maybe giant step, away from excellence toward commodity. Yet my fear is that the lawyers who would sign up for this mutt couldn't care less.That's my gut reaction as well, but let's face some facts. Law's professionalism went out the window a long time ago. The profession is now over saturated with 15k excess graduates every year in a market that is threatened to shrink by both outsourcing and technological advances.
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I find it hard to blame some anonymous entrepreneurial law student from putting together this horrible idea. He's just trying to make a buck, and the creation of this new concept doesn't compel lawyers to sign up, lawyers to outbid each other to see how low they can go, lawyers to try to glom up cases in areas where they lack competency or lawyers to provide less than stellar services. It doesn't require that things go horribly wrong. But we all know they will.
And yet, attorneys at the top of the food chain still make a very good living, both the BigLaw partners and those working is solo firms at so-called "boutiques." There are absurd inefficiencies and market illusions harming consumers while the practitioners most burdened by the oversupply of attorneys is carrying a disproportionately heavy amount of non-dischargable debt acquired by entering the "profession."
Real professions don't set up situations such as that. Instead, they regulate who can enter the profession in order to ensure that there are few licensed professionals who struggle to make a living or pay off the costs of join the profession. The legal profession discarded that principle when it opened law school to any Joe and Betty with a 150 LSAT and a federal loan application. It cannot now hide behind professionalism as a shield to keep normal business conditions for penetrating every inch of the "profession" in a veiled attempt to keep billable hour rates unduly high.
At some point, something has to give.
I don't think this site will be a success. Indeed, as Simple Justice points out, other sites like this have failed previously, and I see too many ethical hurdles that may kill this site, especially if bar associations start looking after their interests and prohibit participation in these sites to maintain illusive values.
But people can't live in the dark forever, and you can't keep pumping out attorneys (i.e. supply) without prices, and therefore salaries, collapsing at some point. Maybe reverse auctions won't do it, but something will accelerate the race to the bottom that can already been seen in some areas.