Vass Bednar: Why is Dye and Durham facing scrutiny in Australia and Britain, but not at home?

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Competition authorities in two peer countries — the United Kingdom and Australia — are investigating the implications of Canadian software company Dye & Durham Corp.’s acquisition history. Canada’s Competition Bureau, weirdly, is not.

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In the UK, Dye & Durham could be forced to sell its British business after a review by the British competition regulator. Australia’s competition regulator recently raised concerns over a proposed Dye & Durham’s proposed purchase of Link Administration Holdings Ltd.

Meanwhile, in Canada, a group of lawyers has independently commenced a class action lawsuit against Dye & Durham and others for alleged breaches of competition law. The lawsuit alleges the defendants conspired to charge an artificially inflated fee for the use of its real estate transaction software.

Maybe if you want competition justice comparable to other jurisdictions, you have to take a do-it-yourself approach. However, the lawsuit focuses on potentially anti-competitive behaviour by Dye & Durham, and not the company’s aggressive acquisition strategy. Yet Dye & Durham’s recent acquisition of Telus Corp.’s Telus Financial Solutions meets Canada’s threshold for merger review.

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But instead of defending its explicitly monopolistic acquisition strategy at the Competition Bureau, Dye & Durham is reinforcing its business strategy by extending its contract with the province of Ontario to provide electronic business registry services, giving itself a halo of legitimacy by partnering with the country’s biggest provincial government.

“We’re ensuring Ontarians have access to critical digital tools that make doing business in our province easier,” Ross Romano, minister of government and consumer services at the time of the March announcement, said in a press release issued by the company.

It is incredible that Dye & Durham has evaded criticism at home. One reason Canada isn’t currently investigating the company could be that the Competition Bureau lacks the power to compel information for market studies ahead of a formal investigation. This means it cannot access information from companies that might help to illuminate potentially anti-competitive market trends as other competition authorities can. Another reason could be our weak merger control regime, which is permissive of harmful transactions.

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The Competition Bureau itself acknowledged these deficiencies in a recent response to former Senator Howard Wetston’s examination of the Canadian Competition Act. While extending the merger review horizon beyond one year may facilitate better observations of market evolutions, citizens expect our competition authority to be more effective, as they perceive that it is too easy for big business to take advantage of them.

Further complicating a potential Dye & Durham competition case is that provinces oversee consumer protection, and the federal government polices competition. So, even if price increases of a wholesaler or a business-to-business service provider are passed onto consumers, in Canada, competition law does not explicitly address excessive pricing. It may be that consumer protection authorities should intervene on the basis of price gouging if the Competition Bureau cannot or will not intervene even though prices have significantly increased following mergers.

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The very structure of Dye & Durham itself might give it shelter from competition rules because laws haven’t kept pace with the digital economy. A new book by economist James Bessen details how corporations use software to dominate industries, kill innovation, and undermine regulation. Bessen argues that “information technology is changing the nature of markets, innovation, and firm organization, exacerbating economic divisions, and undermining government regulation.” The nature of software is challenging our existing regulatory structures and processes, exposing the need for an overhaul.

There’s some evidence that Dye & Durham’s raptorial approach to acquisitions might be causing customers to shift to their competitors, which in turn could prompt investors to get behind the company’s rivals. In theory, that could spur competition in the market for legal software without the government having to get involved. Perhaps the emergent marketplace has been invigorated by the company’s price hikes, yet there is also evidence that other firms have followed Dye & Durham’s lead by raising prices.

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Nonetheless, there is no denying that competition law is evolving faster elsewhere than it is in Canada. As a result, a Canadian company is being publicly investigated by competition authorities in two big, English-speaking democracies, but not here in Canada, even though the company has been similarly consolidating its market power by purchasing rivals and substantially raising their prices.

Canada’s forthcoming review of the Competition Act will need to tackle how best to approach merger enforcement guidelines for a global, digital economy that is driven by data. The information needed to determine whether an investigation is warranted is unlikely to be publicly available or volunteered by stakeholders, which makes it reasonable to empower the Competition Bureau with the same capabilities as its international peers.

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Further, in instances where the Competition Bureau is not investigating a Canadian firm’s practices, or a merger, but another jurisdiction is, the Competition Bureau should offer a brief rationale for why it isn’t in order to establish accountability. When peer jurisdictions pursue competition cases against a Canadian company and Canada does not, it sends a confusing message to citizens about the purpose of our public policies. If anything, the lack of comparable investigations into the market implications of Dye & Durham’s acquisitions and pricing behaviour are a sobering reminder of how Canadian competition law continues to privilege the concept of economic efficiency over other considerations, consistently elevating corporate interests over consumers and small businesses in the process. Privately taken cases or class-action lawsuits are no substitute for the full capacity of a modern Competition Bureau.

Vass Bednar is an adjunct professor of political science at McMaster University and executive director of the school’s Master of Public Policy in Digital Society program.