Antitrust Law Daily Wrap Up, CONSUMER PROTECTION NEWS: Fidelity settles FTC charges in acquisition of Lender Processing Services, (Dec 27, 2013)

By Linda O’Brien, J.D., LL.M.

The FTC announced on December 24 that Fidelity National Financial, Inc., the nation’s largest provider of commercial and residential title insurance services, has agreed to sell title plant assets to resolve FTC charges that its proposed $2.9 billion acquisition of Lender Processing Services, Inc. (LPS) is likely to substantially lessen competition by combining the merged firm’s 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. The divestitures are designed to reduce the likely anticompetitive effects of the acquisition, 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 other entities to determine the title status of real property. Users of the title plant access the information to establish the chain of title and make other determinations in order to underwrite and issue title insurance policies.

Fidelity, a publicly traded company based in Jacksonville, Florida, is comprised of five title insurance underwriting companies, andis a leading provider of mortgage services and diversified services to the mortgage industry.Fidelity generated approximately $6.5 billion in total revenue in 2013. LPS, also a publicly traded company based in Jacksonville, is a leading provider of integrated loan technology, services, data, and analytics solutions to mortgage, real estate, and capital markets industries.On May 28, 2013, Fidelity entered into an agreement to acquire LPS for approximately $2.9 billion.

In its complaint, (In re Matter of Fidelity National Financial, Inc., Docket No. C-4425, File No. 131-0159), the FTC charged that 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 was 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. The 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.

The proposed order also requires Fidelity to sell an ownership interest equivalent to LPS’s share in the joint title plant that serves the Portland area to a buyer approved by the FTC, 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. The 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.

Companies: Fidelity National Financial, Inc.; Lender Processing Services, Inc.

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