A view and some estimates on market concentration of spend in the US legal industry

Mark Harris of Axiom remarked at the recent Georgetown Law Center conference that the Fortune 200 control 85 percent of the $100 billion legal market in the United States. The 200 largest US law firms, he then added, have revenue of about $85 billion. If both those statements are even approximately true, there is far more concentration in the legal market than most people recognize.

The Fortune 500 participants in my General Counsel Metrics benchmark survey, of which there were 95, reported total legal spend of $9.8 billion (See my post of Feb. 11, 2011: analysis of Fortune 500 benchmark data.). Assume 60 percent of that spend went to law firms and multiply by five to reach 500 Very roughly, that leaves $30 billion in projected external spend by the Fortune 500. Since the median total spend of my benchmark group was $50 million, perhaps my group is not representative at the highest end so perhaps $60-80 billion is about right (and even so, some non-trivial portion of that spend goes to non-US law firms).

As to the huge law firms, on a very broad guess something like a fifth of their revenue might come from individuals or non-US companies. After all, around 10-15 percent of their lawyers practice from offices outside the US.

Even if the Fortune 500 spend $70 billion a year on US law firms and the largest US law firms bring in US corporate fees of $60 billion or so, the two figures may be within shouting distance. The point put forward based on these back-of-the-envelope figures is that most people view the US law firm market as fragmented. True, by numbers of firms but much less so by concentration of revenue. On the corporate side, while there are hundreds of thousands of companies, the few giants at the top control a large portion of legal spend.

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