Hacker News Reader

Comment by pravda | Hacker News Reader

Can someone explain why those big profits don't get competed away?

Why don't the corporate employers of the big firms negotiate better prices?

A couple reasons:

• If you have a bet-the-company litigation matter, your GC will choose an expensive, well-known firm. They may be somewhat price-sensitive, but they will be more sensitive to picking a firm that is very prestigious. That way, if the litigation doesn't go well, the GC can say: "well, I went with [super pricey firm], so it wasn't my fault we lost!"

• Some lawyers are just better than others, and the legal profession has gatekeepers (bar associations) that prevent a flood of new entrants. Equally importantly, there is just a limited supply of (for example), battle-tested litigators with experience in a particular field. Ditto for seasoned corporate transaction attorneys who know your company's space. People pay a premium for that experience, and competitors can't pop up overnight because it takes decades to accumulate the experience.

source: I'm a former corporate lawyer

That's true, some one with my level of experience in tech in say labour law can command a vastly greater salary.

Its why Cherie Blair earned 10x what her husband Tony Blair did when he was Prime Minister. Cherie Blair is an expert in complex labour law BTW.

Underscoring the value of “battle-tested” lawyers is the implicit and very real factor of hidden information. These top litigators have tons of it, relationships and reputations with judges and courts, knowledge of poorly documented procedures, etc. it’s not that they’re smarter or better lawyers than anyone else, just a most protected class of people who have done it before. And the only way to be admitted to the club is to work under someone in the club. It’s protectionism through bureaucracy at its purest. The drivers of this, of course, are the judges. Who through hubris and incompetence foster these conditions. It’s not that they’re in on the game, really, it’s just that they’re dictators of their own court and have no motivation to make their courts accessible to anyone, and feel empowered to punish clients represented by attorneys that don’t know their preferred formats and fonts. It’s a silly situation that should be dealt with

I suspect one factor is that although corporate/commercial law firms bill huge amounts they are often a pretty small percentage of the overall transaction - so nobody really cares (people are generally motivated to make deals happen rather than making sure that the overhead for each deal is as small as possible).

I think a similar sort of thing that comes into play for Investment Banking - when the skill of the endeavor means an upside for the firm of hundreds of millions, or billions of dollars, then shopping for a low price is the last thing that you'd want to do.

Monopoly rent-seeking plays a part. To compete for many/most of these matters, one generally has to have completed an expensive three-year stent at a US law school, passed a bar exam and be in good standing in the bar of the relevant jurisdiction.

Reply on news.ycombinator.com