Why AI Has Not Suppressed Legal Fees

Summary

This opinion article argues that generative AI has not yet suppressed legal fees because efficiency gains are being absorbed by stronger demand, additional review and expanded matter scope. Demand for lawyers’ time grew 4.2% year over year, compared with a normal 1.5% increase, while about 90% of legal spending still uses hourly arrangements. In-house lawyers also report limited savings: nearly 60% saw no noticeable reduction from firms’ AI use. US law firms recorded higher technology spending, billing rates, hours and revenue in 2026, while large firms reported a 17.7% increase in unbilled work and a 12.4% revenue increase. The article identifies several reasons hours have not fallen: lawyers must review AI drafts, teams can examine far more contracts within the same matter, and firms may spend time checking outputs generated by clients or other people’s tools. AI-related work itself is also creating new demand, and some lawyers may retain efficiency gains rather than reduce invoices. Under hourly billing, the article says savings generally belong to the client, while fixed-fee arrangements can allow firms to keep them. Firms are experimenting with fixed quotes, internal AI platforms and tracking AI use in time-entry systems, while clients increasingly ask for lower fees and may restrict AI-generated deliverables. Ethics rules add constraints: ABA guidance treats tool costs as overhead unless agreed otherwise, Virginia permits unchanged fixed fees in some circumstances, and California guidance requires disclosure and limits pass-through costs to actual matter-specific expenses. The article concludes that AI may increase capacity and change pricing, but it has not yet displaced the billable hour.