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ACCC flags competition concerns with Dye & Durham’s proposed acquisition of Link

Given Link Administration Holdings’ almost 43 per cent ownership stake in PEXA, the competition regulator has raised concerns with the acquisition of Link by Dye & Durham – a move that has been welcomed by an e-conveyancing disruptor.  

user iconJerome Doraisamy 17 June 2022 SME Law
ACCC flags competition concerns with Dye & Durham’s proposed acquisition of Link
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The Australian Competition and Consumer Commission (ACCC) has raised preliminary and “significant” competition concerns with the proposed acquisition of Link Administration Holdings (ASX: LNK) by international cloud-based software and tech provider Dye & Durham, given Link’s stake in PEXA Group (PEXA) (ASX: PXA).

ACCC concerns

In a statement issued earlier today (Thursday, 16 June), the ACCC flagged its concerns, which relate to the “transitional period” that Australia’s conveyancing sector is currently undergoing, as it moves to electronic conveyancing and digitalisation.

 
 

While the combination of D&D and Link does not raise issues, the regulator said, “by acquiring Link, D&D would gain the 42.77 per cent shareholding in [e-settlements provider] PEXA, that Link currently owns”.

It is the potential vertical integration of D&D’s operations and PEXA that gives rise to the competition concerns”, the ACCC submitted.

“Consumers may not be familiar with these companies in name, however this acquisition is relevant to anyone buying or selling property,” ACCC deputy chair Mick Keogh said.

Conveyancing, the regulator detailed, is a “critical element” of property markets in Australia that affects financial settlement and title transfer. E-conveyancing, it continued, has digitised and transformed this process in recent years, and services throughout the conveyancing workflow are becoming increasingly integrated – “including directly into the PEXA Exchange”.   

The proposed acquisition would align PEXA – which the regulator described as “a near monopoly provider of electronic lodgment network services” – with D&D, “a significant supplier” of software to lawyers and conveyancers, significantly increasing vertical integration in this industry.

“Given PEXA’s position as the only fully operational electronic lodgment network, the ACCC will closely scrutinise any transaction that would result in vertical integration between PEXA and other industry participants,” Mr Keogh said. 

While the transaction will not provide D&D with majority control of PEXA, the ACCC said that “it considers preferential conduct may benefit both D&D and PEXA”.  

“We have significant preliminary concerns that this transaction would enable D&D and PEXA to engage in mutual preferential dealing that would hinder existing competition or raise barriers to entry in one or more markets in the conveyancing workflow,” Mr Keogh said.

More broadly, the regulator is currently considering how the regulatory framework for electronic lodgment network operators (ELNOs) affects these concerns, including recent amendments relating to the important issue of interoperability between electronic lodgment network operators.

“The regulatory framework is evolving over time, but market participants have expressed concerns about whether it will effectively constrain D&D and PEXA’s ability to engage in conduct that hinders competition,” the ACCC said.

‘Competition is vital’

E-conveyancing disruptor Sympli has welcomed the release of the ACCC’s statement of issues, noting that if D&D were to acquire Link’s stake in PEXA, it would have the effect of “significantly stifling competition in the industry and ultimately limiting opportunity, choice and outcomes for customers”.

At its core, the company argued, the proposed acquisition will vertically integrate PEXA with D&D, allowing PEXA to leverage the wide range of conveyancing products and services offered by D&D.

This, Sympli submits, is “a set up that damages competition between ELNOs and the efficiency of the conveyancing process”.

Sympli chief executive Philip Joyce, who recently appeared on an episode of LawTech Talks to discuss the future of e-conveyancing – and has also spoken with Lawyers Weekly about the inextricable need for interoperability and the recent reforms passed in NSW – said that Sympli “continues to stand” with the industry on the issue of vertical integration.

“Competition is vital in the Australian e-conveyancing industry, and all industry stakeholders are tirelessly working toward a more competitive industry, initially through the delivery and implementation of interoperability,” he posited.

“ELNOs should not offer conveyancing products or services and Sympli has made it very clear we have no interest in doing so. We expect the same from PEXA.

“The outcome of the ACCC review is timely recognition that the monopoly structure will no longer stand.

“Customers deserve a national eConveyancing industry that offers the best outcomes, and those are delivered through competition. Sympli continues to work collaboratively with all industry stakeholders on delivering better outcomes for the sector and our valued customers.”

The ACCC invites submissions from interested parties in response to the statement of issues by 7 July 2022. Its final decision is scheduled for 8 September 2022.