International firm Dye & Durham (D&D), which provides conveyancing, manual property settlement services, legal practice management software and information broking services, has moved to buy administration services provider Link Administration Holdings.
Link currently holds a 42.7 per cent stake in PEXA Group, which operates an electronic lodgement network that facilitates digital conveyancing settlements and currently dominates the Australian e-conveyancing market.
Dye & Durham and Link have previously aimed for the takeover to wrap up in June or July, pending regulatory approvals.
But the Australian Competition and Consumer Commission (ACCC) has now declared concerns around the deal, worrying about the impacts for competition in the conveyancing sector, as it transitions to digitisation.
It has warned the sale would align PEXA, a “near monopoly provider of electronic lodgement network services” with Dye & Durham, a significant supplier of software to lawyers and conveyancers, and significantly increase vertical integration in the industry.
While the transaction would not grant Dye & Durham majority control of PEXA, the regulator believes both companies would benefit from preferential conduct.
ACCC deputy chair Mick Keogh commented that the regulator had closely scrutinised the transaction and the potential for vertical integration due to PEXA’s position as the “only fully operational electronic lodgement network”.
“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.
The matter has been referred to a more comprehensive review, with the ACCC set to return a final decision on 8 September.
A responding statement from D&D commented: “Dye & Durham is concerned about the statement that the ACCC has issued and is evaluating what impact it may have on the proposed transaction with Link.
“As always, the company will work collaboratively with all parties involved.”
The watchdog has reported that it is considering the regulatory framework for electronic lodgement network operators, including recent amendments relating to the issue of interoperability, the ability of groups to exchange information and to operate in conjunction with each other.
Interoperability has been pegged as key for competition in e-conveyancing, as it would allow each party in the settlement process, to use the electronic lodgement network operator of their choice, irrespective of what the other parties choose to use.
Currently, the e-conveyancing industry is working to achieve national interoperability by around mid-2023, in line with a timeline set by a state ministerial direction.
The regulatory framework for interoperability is being adjusted over time, but the ACCC has reported that market participants are concerned over whether it would be able to constrain D&D and PEXA’s ability to hinder competition.
The ACCC has invited submissions on the matter.
E-conveyancing provider Sympli has welcomed the expression of concerns from the ACCC, stating the acquisition could stifle competition in the industry and limit opportunity, choice and outcomes for customers.
Sympli chief executive Philip Joyce expressed concerns around the potential for vertical integration.
"ELNOs [electronic lodgement network operators] 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," Mr Joyce said.
"The outcome of the ACCC review is timely recognition that the monopoly structure will no longer stand. Customers deserve a national e-conveyancing industry that offers the best outcomes and those are delivered through competition."
Meanwhile, the regulator is also investigating claims of anticompetitive conduct from PEXA, from Sympli.
A spokesperson for the regulator confirmed that is considering the accusations saying that PEXA has refused to engage with industry bodies, spread misinformation and shut out competition, by acting to delay interoperability.
PEXA had previously proposed to delay the roll-out of interoperability for the first transaction to October 2022, from the previously agreed deadline of first quarter, 2022, later claiming the initial timeline was “not adequately linked to the scale and complexity of work required”.
However, a statement from the Australian Registrars’ National Electronic Conveyancing Council (ARNECC) explained PEXA’s new date would set back interoperability for all transactions to 2024.
Former ACCC chair Rod Sims had warned that delays to interoperability had risked placing competition in the electronic conveyancing sector beyond reach, as he asked governments for legislation and regulations that would immediately require it.
National peak industry bodies such as the Australian Banking Association, Australian Institute of Conveyancers and the Law Council of Australia, also called for a timely introduction of interoperability, in the interests of security and competition.
Dye & Durham entered the Australian market last year, when it bought the property division from business services provider SAI Global and legal, property and commerce software provider GlobalX Information.