Markets Wired

Fidelity National Financial, Inc. has agreed to settle Federal Trade Commission charges that its proposed $2.9 billion acquisition of Lender Processing Services, Inc. (LPS) would likely substantially lessen competition by combining the firms’ title plant assets in several local markets in Oregon.

To preserve competition, the proposed settlement requires Fidelity to sell a copy of LPS’s title plants in six Oregon counties and an ownership interest equivalent to LPS’s share of a jointly owned title plant in the Portland, Oregon, metropolitan area. These divestitures are designed to counteract the likely anticompetitive effects of the transaction, while preserving any efficiencies that might arise from the combination of Fidelity and LPS.

Title plants are databases used by abstractors, title insurers, title insurance agents, and others to determine the title status of real property. Title plant users access this information to establish the chain of title and make other determinations in order to underwrite and issue title insurance policies.

On May 28, 2013, Fidelity entered into an agreement to acquire LPS for approximately $2.9 billion. Fidelity is a publicly traded company based in Jacksonville, Florida. It is a leading provider of mortgage services and diversified services to the mortgage industry, and is the largest title insurance underwriter in the United States. LPS also is a publicly traded company based in Jacksonville. It is a leading provider of technology solutions, transaction services, and data and analytics to the mortgage and real estate industries.

According to the FTC’s complaint, the proposed combination of Fidelity’s and LPS’s title plant assets in six individual Oregon counties and the tri-county Portland, Oregon metropolitan area is likely to substantially lessen competition, in violation of U.S. antitrust laws.

Oregon law requires title insurers to own an interest in a title plant in each county in which they issue policies. This requirement creates a barrier to entry for new firms seeking to provide title insurance underwriting. The proposed acquisition would eliminate one of only a few available title plants in six Oregon counties, and make it possible for Fidelity and only one other underwriter to exclude competing firms from having an interest in a joint title plant in the Portland metropolitan area. Without the provisions in the consent order, the FTC alleges that the proposed acquisition is likely to increase the risk of anticompetitive coordination between title plant owners in these local markets.

The proposed order settling the FTC’s charges will restore competition that is likely lost through the merger but will not interfere with any efficiencies that may be associated with the combination of the two companies. The proposed order requires Fidelity to sell a copy of LPS’s title plants serving the following Oregon counties to an FTC-approved acquirer within five months of closing the acquisition: 1) Clatsop, 2) Columbia, 3) Coos, 4) Josephine, 5) Polk, and 6) Tillamook. The required divestitures will preserve the number of independent title plants in each county.

In addition, the proposed order requires Fidelity to sell an ownership interest equivalent to LPS’s share in the joint title plant that serves the Portland area to an FTC-approved buyer, also within five months of the deal’s close. It also prohibits Fidelity from exercising its voting rights or influencing others to expel the buyer from the joint plant in the event that the buyer fails to operate an active title business for three months. This provision ensures that the buyer will have the flexibility to develop and carry out its title insurance business.

Finally, the proposed order requires Fidelity to notify the FTC in advance before acquiring any title plants in Oregon in certain circumstances that might raise anticompetitive concerns, and includes an order to maintain assets that requires Fidelity to maintain the title plant assets and the joint plant until the divestitures are complete.

The Commission vote to accept the consent agreement containing the proposed consent order for public comment was 3-1, with Commissioner Joshua D. Wright voting no. The Commission issued a separate statement and Commissioner Wright issued a dissenting statement. The FTC will publish a description of the consent agreement package in the Federal Register shortly. The agreement will be subject to public comment for 30 days, beginning today and continuing through January 23, 2014, after which the Commission will decide whether to make the proposed consent order final. Interested parties can submit written comments electronically or in paper form by following the instructions in the “Invitation To Comment” part of the “Supplementary Information” section.

Comments in paper form should be mailed or delivered to:  Federal Trade Commission, Office of the Secretary, Room H-113, 600 Pennsylvania Avenue, N.W., Washington, DC 20580. The FTC is requesting that any comment filed in paper form near the end of the public comment period be sent by courier or overnight service, if possible, because U.S. postal mail in the Washington area and at the Commission is subject to delay due to heightened security precautions. Comments can be submitted electronically.

NOTE: The Commission issues an administrative complaint when it has “reason to believe” that the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest. When the Commission issues a consent order on a final basis, it carries the force of law with respect to future actions. Each violation of such an order may result in a civil penalty of up to $16,000.

The FTC’s Bureau of Competition works with the Bureau of Economics to investigate alleged anticompetitive business practices and, when appropriate, recommends that the Commission take law enforcement action. To inform the Bureau about particular business practices, call 202-326-3300, send an e-mail to antitrust{at}ftc{dot}gov, or write to the Office of Policy and Coordination, Bureau of Competition, Federal Trade Commission, 601 New Jersey Ave., N.W., Room 7117, Washington, DC 20001. To learn more about the Bureau of Competition, read Competition Counts. Like the FTC on Facebook, follow us on Twitter, and subscribe to press releases for the latest FTC news and resources.