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The MARKET Will Decide the Price of Services, Not WalMart

I got quoted in IPLaw360 on Saturday in a piece on Walmart's ill-conceived memo trying to rein in associate rates charged them for work. The upshot is that Walmart wants no rate increases unless an individual memo is approved as to the individual worth of each attorney billing on a matter. Other than the fact that I cannot believe such a procedure would ever be put into practice on a consistent, to say nothing of a long-term, basis, the plan will of course backfire on Walmart, at least from the law firm point of view.

First, I have to say that I was quoted somewhat incorrectly. The author of the piece indicates that I thought firms would use "tricks" to keep up hourly rates. This is not precisely the case. What will happen, however, is that firms will do everything within their power to keep their stated rates at the premium/premier levels, and use tools such as blended rates, and other devices, to keep clients happy, without admitting to lowering fee rates.

Second, there is no way in hell Walmart or anyone else is going to rein in legal fees. If it is not feasible to control "prices" on a national level with the full support of the federal government behind it, then a single firm, or even a group of corporate concerns is not going to keep this in check. Hello, people!!! The MARKET decides prices, not individual companies. Of course, Walmart and anyone else can price themselves down into the sub-prime market (if you will). There are plenty of attorneys who work work for Walmart at even $120/hour--but does Walmart want there people? Basically, the white shoe firms of the world (using the phrase loosely) will simply move on. If you want premier help, you pay premier prices. Period.

What Walmart surprising cannot figure out (as they are supposed to be savvy retailers as I recall) is that market demand and supply control price. Not testosterone-heavy corporate counsel's departments. Such a move by Walmart to enforce a "slow-down" of fee increases only helps some. It will help their current firms to decide whether they want to continue representing Walmart, and it will help the next-lower-tier firm who is willing to charge less for their less-then-premier services (as perceived by the market, of course) garner a new client. Add to that the well-known fact that as an industry, demand for legal services is incredibly inelastic. Just browse over to Bruce's blog for a primer.

The fact that the greatest global labor shortage of all time in the professional ranks of all professions is upon us and will continue for the foreseeable future means that premier prices--and all prices--will continue to rise because the cost of labor will necessarily continue to rise to attract and retain talent.

There isn't a damn thing Walmart--or anyone else--can do about that.

Just a thought.