Notice2023-19534
Intercontinental Exchange, Inc. and Black Knight, Inc.; Analysis of Agreement Containing Consent Order To Aid Public Comment
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
September 11, 2023
Issuing agencies
Federal Trade Commission
Abstract
The consent agreement in this matter settles alleged violations of federal law prohibiting unfair methods of competition. The attached Analysis of Proposed Consent Orders to Aid Public Comment describes both the allegations in the complaint and the terms of the consent orders--embodied in the consent agreement--that would settle these allegations.
Full Text
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<title>Federal Register, Volume 88 Issue 174 (Monday, September 11, 2023)</title>
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[Federal Register Volume 88, Number 174 (Monday, September 11, 2023)]
[Notices]
[Pages 62371-62374]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2023-19534]
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FEDERAL TRADE COMMISSION
[File No. 221 0142]
Intercontinental Exchange, Inc. and Black Knight, Inc.; Analysis
of Agreement Containing Consent Order To Aid Public Comment
AGENCY: Federal Trade Commission.
ACTION: Proposed consent agreement; request for comment.
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SUMMARY: The consent agreement in this matter settles alleged
violations of federal law prohibiting unfair methods of competition.
The attached Analysis of Proposed Consent Orders to Aid Public Comment
describes both the allegations in the complaint and the terms of the
consent orders--embodied in the consent agreement--that would settle
these allegations.
DATES: Comments must be received on or before October 11, 2023.
ADDRESSES: Interested parties may file comments online or on paper by
following the instructions in the Request for Comment part of the
SUPPLEMENTARY INFORMATION section below. Please write: ``ICE and Black
Knight; File No. 221 0142'' on your comment and file your comment
online at <a href="https://www.regulations.gov">https://www.regulations.gov</a> by following the instructions on
the web-based form. If you prefer to file your
[[Page 62372]]
comment on paper, please mail your comment to the following address:
Federal Trade Commission, Office of the Secretary, 600 Pennsylvania
Avenue NW, Suite CC-5610 (Annex R), Washington, DC 20580.
FOR FURTHER INFORMATION CONTACT: Ashley Masters (202-326-2291), Bureau
of Competition, Federal Trade Commission, 400 7th Street SW,
Washington, DC 20024.
SUPPLEMENTARY INFORMATION: Pursuant to section 6(f) of the Federal
Trade Commission Act, 15 U.S.C. 46(f), and FTC Rule Sec. 2.34, 16 CFR
2.34, notice is hereby given that the above-captioned consent agreement
containing a consent order to cease and desist, having been filed with
and accepted, subject to final approval, by the Commission, has been
placed on the public record for a period of 30 days. The following
Analysis of Agreement Containing Consent Orders to Aid Public Comment
describes the terms of the consent agreement and the allegations in the
complaint. An electronic copy of the full text of the consent agreement
package can be obtained from the FTC website at this web address:
<a href="https://www.ftc.gov/news-events/commission-actions">https://www.ftc.gov/news-events/commission-actions</a>.
You can file a comment online or on paper. For the Commission to
consider your comment, we must receive it on or before October 11,
2023. Write ``ICE and Black Knight; File No. 221 0142'' on your
comment. Your comment--including your name and your state--will be
placed on the public record of this proceeding, including, to the
extent practicable, on the <a href="https://www.regulations.gov">https://www.regulations.gov</a> website.
Because of the agency's heightened security screening, postal mail
addressed to the Commission will be delayed. We strongly encourage you
to submit your comments online through the <a href="https://www.regulations.gov">https://www.regulations.gov</a>
website. If you prefer to file your comment on paper, write ``ICE and
Black Knight; File No. 221 0142'' on your comment and on the envelope,
and mail your comment to the following address: Federal Trade
Commission, Office of the Secretary, 600 Pennsylvania Avenue NW, Suite
CC-5610 (Annex R), Washington, DC 20580.
Because your comment will be placed on the publicly accessible
website at <a href="https://www.regulations.gov">https://www.regulations.gov</a>, you are solely responsible for
making sure your comment does not include any sensitive or confidential
information. In particular, your comment should not include sensitive
personal information, such as your or anyone else's Social Security
number; date of birth; driver's license number or other state
identification number, or foreign country equivalent; passport number;
financial account number; or credit or debit card number. You are also
solely responsible for making sure your comment does not include
sensitive health information, such as medical records or other
individually identifiable health information. In addition, your comment
should not include any ``trade secret or any commercial or financial
information which . . . is privileged or confidential''--as provided by
section 6(f) of the FTC Act, 15 U.S.C. 46(f), and FTC Rule Sec.
4.10(a)(2), 16 CFR 4.10(a)(2)--including competitively sensitive
information such as costs, sales statistics, inventories, formulas,
patterns, devices, manufacturing processes, or customer names.
Comments containing material for which confidential treatment is
requested must be filed in paper form, must be clearly labeled
``Confidential,'' and must comply with FTC Rule Sec. 4.9(c). In
particular, the written request for confidential treatment that
accompanies the comment must include the factual and legal basis for
the request and must identify the specific portions of the comment to
be withheld from the public record. See FTC Rule Sec. 4.9(c). Your
comment will be kept confidential only if the General Counsel grants
your request in accordance with the law and the public interest. Once
your comment has been posted on <a href="https://www.regulations.gov">https://www.regulations.gov</a>--as legally
required by FTC Rule Sec. 4.9(b)--we cannot redact or remove your
comment from that website, unless you submit a confidentiality request
that meets the requirements for such treatment under FTC Rule Sec.
4.9(c), and the General Counsel grants that request.
Visit the FTC website at <a href="https://www.ftc.gov">https://www.ftc.gov</a> to read this document
and the news release describing this matter. The FTC Act and other laws
the Commission administers permit the collection of public comments to
consider and use in this proceeding, as appropriate. The Commission
will consider all timely and responsive public comments it receives on
or before October 11, 2023. For information on the Commission's privacy
policy, including routine uses permitted by the Privacy Act, see
<a href="https://www.ftc.gov/site-information/privacy-policy">https://www.ftc.gov/site-information/privacy-policy</a>.
Analysis of Agreement Containing Consent Orders To Aid Public Comment
The Federal Trade Commission (``Commission'') has accepted for
public comment, subject to final approval, an Agreement Containing
Consent Orders (``Consent Agreement'') with Intercontinental Exchange,
Inc. (``ICE'') and Black Knight, Inc. (``Black Knight'') (collectively,
``Respondents'').
On May 4, 2022, ICE and Black Knight entered into an agreement
whereby ICE would acquire Black Knight for approximately $13.1 billion
(the ``Proposed Transaction''). The Proposed Transaction raises
significant competitive concerns relating to the price and quality of
residential mortgage origination software throughout the United States.
ICE and Black Knight are the nation's two dominant residential mortgage
loan origination system (``LOS'') and product, pricing, and eligibility
engine (``PPE'') providers. Their combination would further consolidate
already-concentrated LOS and PPE markets and would increase ICE's
incentive to disadvantage independent PPE providers who rely on
software integration with ICE's Encompass LOS to serve their own
customers.
On March 7, 2023, ICE and Black Knight announced a deal to divest
Black Knight's Empower LOS and certain associated products and services
to Constellation Web Solutions Inc. and its affiliates (collectively,
``Constellation''). Because Respondents' proposed divestiture did not
address the full range of possible harms arising from the Proposed
Transaction, the Commission chose to challenge the deal. On March 9,
2023, the Commission issued an administrative complaint alleging that
the Proposed Transaction, if consummated, may substantially lessen
competition in the markets for LOSs, commercial LOSs, PPEs, and PPEs
for users of ICE's Encompass LOS in violation of Section 7 of the
Clayton Act, 15 U.S.C. 18, and Section 5 of the Federal Trade
Commission Act, 15 U.S.C. 45. On April 10, 2023, Commission staff also
filed suit in the United States District Court for the Northern
District of California under Section 13(b) of the Federal Trade
Commission Act, 15 U.S.C. 53(b), seeking to enjoin Respondents from
merging until the legality of the Proposed Transaction had been
adjudicated.
After months of litigation, ICE and Black Knight announced on July
17, 2023, a deal to divest Black Knight's Optimal Blue business unit,
also to Constellation, which contains the Optimal Blue PPE product. In
light of the deals to divest Black Knight's LOS and PPE businesses and
progress made in negotiations, the Commission and Respondents agreed to
a dismissal without prejudice of the United States District Court
action on August 7, 2023.
[[Page 62373]]
Since the announcement of the Optimal Blue divestiture, the
Commission and Respondents have negotiated additional terms, now
memorialized in the Consent Agreement and incorporated in the Decision
and Order (``D&O''), that better ensure these divestitures will
position Constellation as an effective competitor. The Consent
Agreement requires Respondents to complete the divestitures to
Constellation within 20 days after ICE consummates its acquisition of
Black Knight. The Consent Agreement contains additional safeguards to
ensure that Respondents maintain the viability of the divestiture
assets until the divestitures are complete and provide necessary
transition services to Constellation.
The Commission has placed the Consent Agreement on the public
record for 30 days to solicit comments from interested persons.
Comments received during this period will become part of the public
record. After 30 days, the Commission will review the comments received
and decide whether it should withdraw, modify, or finalize the Consent
Agreement.
I. The Respondents
Respondent ICE is a publicly traded corporation incorporated in
Delaware, with its headquarters in Atlanta, Georgia. ICE provides
market infrastructure, data services, and technology solutions in three
segments: exchanges (including the New York Stock Exchange), fixed
income and data services, and mortgage technology. In 2020, ICE
acquired Ellie Mae, along with its widely used Encompass LOS. ICE also
offers a PPE--the Encompass Product and Pricing Service (``EPPS'')--to
Encompass users.
Respondent Black Knight is a publicly traded corporation
incorporated in Delaware, with its headquarters in Jacksonville,
Florida. Black Knight is a provider of software, data, and analytics
for the mortgage, real estate, and consumer loan markets. Black
Knight's mortgage technology products include the Empower LOS, the
Mortgage Servicing Platform, and the Optimal Blue PPE. Black Knight
acquired Optimal Blue from the private equity firm GTCR in 2020.
II. The Relevant Markets
The Proposed Transaction presents substantial antitrust concerns
relating to two services central to the residential mortgage loan
origination workflow: LOSs and PPEs. Mortgage lenders of all sizes rely
on LOS software as the primary tool to manage the residential mortgage
loan origination process. An LOS serves as the lender's system of
record for each loan and is used to manage the workflow for the
origination process and to perform commercial, legal, and compliance
tasks required during the lending process. As a mortgage moves from
application to close, it touches on numerous ancillary services
necessary to process, underwrite, fund, and close a loan. The LOS
coordinates and automates much of a lender's interaction with these
ancillary services. Because of the administrative complexity,
regulatory framework, and risk involved in the mortgage origination
process, originating mortgage loans without an LOS would be
prohibitively burdensome and costly for most lenders.
Most mortgage lenders rely on commercial LOSs provided by
specialized vendors, such as ICE's Encompass LOS and Black Knight's
Empower LOS. Though some lenders choose to originate mortgages with in-
house LOSs, the complex programming and compliance tasks involved with
operating an LOS require significant investment and specialized
expertise that is beyond the capabilities of all but a few large
lenders. Even among the few lenders with proprietary systems, the trend
has been to move toward commercial LOSs. Commercial LOSs therefore
constitute a relevant product market in which to analyze the effects of
the Proposed Transaction. A market including commercial and proprietary
LOSs is an appropriate alternate relevant product market in which to
evaluate the effects of the Proposed Transaction.
A PPE is an ancillary service that a mortgage lender uses to
identify potential loan rates for residential loan products for a
borrower, determine the borrower's eligibility for a given loan, and
lock in the loan's terms for the borrower. Software integration between
a PPE and a lender's chosen LOS enables a lender to take advantage of a
PPE's full functionality, allowing loan and application data to flow
automatically between the LOS, PPE, and other ancillary services.
Lenders thus express a strong preference for PPEs integrated with their
LOS of choice. Because users of ICE's Encompass LOS are functionally
limited to choosing among PPEs integrated with Encompass, PPEs for
Encompass users constitute a relevant product market in which to
evaluate the effects of the Proposed Transaction. Similarly, a product
market including all PPEs is an appropriate alternate market through
which to evaluate the effects of the Proposed Transaction.
Because LOS and PPE competition takes place on a national scale,
the relevant geographic market in which to evaluate the Proposed
Transaction is the United States.
III. Effects of the Proposed Transaction on Competition
The Proposed Transaction would eliminate direct and substantial
competition between ICE and Black Knight in each of the relevant
markets. ICE and Black Knight operate the two largest commercial LOSs
in the United States. ICE's EPPS also competes directly with Black
Knight's Optimal Blue PPE for the business of lenders using ICE's
Encompass LOS. Respondents compete on price to market their LOSs and
PPEs, and their customers have benefitted. Respondents also compete on
functionality, which has driven innovation and investment in LOS and
PPE features. By eliminating this head-to-head competition, the
Proposed Transaction would enable the combined firm to increase LOS and
PPE prices and reduce its investment in these products. By giving ICE
control of the popular Optimal Blue PPE, the Proposed Transaction also
would increase ICE's incentive to disadvantage rival PPEs who rely on
software integrations with ICE's Encompass LOS to serve their customers
by foreclosing or restricting the rivals' access to Encompass or
degrading the quality of the rivals' integrations with Encompass.
Finally, the Proposed Transaction would further an existing trend
toward concentration in LOS and PPE markets.
Entry into each relevant market would not be timely, likely, or
sufficient to deter or counteract anticompetitive effects arising from
the Proposed Transaction. Significant barriers to LOS and PPE entry
include substantial investment and software development timelines, as
well as lenders' high switching costs, lengthy switching timelines, and
reluctance to switch to unproven products.
IV. The Proposed Order
The D&O would address the Proposed Transaction's anticipated
anticompetitive effects by requiring Respondents to divest Black
Knight's Optimal Blue business (including the Optimal Blue PPE),
Empower LOS, and certain associated ancillary products and assets to
Constellation. Under the terms of the proposed divestiture,
Constellation would also receive a license to resell with Empower
certain other Black Knight mortgage-related products and services which
would be acquired by ICE. The D&O requires that the divestitures be
completed no later
[[Page 62374]]
than 20 days after Respondents consummate ICE's acquisition of Black
Knight. The Order to Maintain Assets requires Respondents to maintain
the viability of the divestiture assets until the divestitures are
complete.
The D&O contains additional provisions designed to ensure the
effectiveness of this relief. For example, the D&O requires Respondents
to provide Constellation with transition assistance as it integrates
the acquired assets to enable Constellation to operate the divested
businesses similarly to how they were operated by Black Knight. The D&O
also requires Respondents to obtain all third-party and governmental
consents necessary to effectuate the divestitures.
To help Constellation succeed in operating the divested assets, the
D&O further requires Respondents for one year to facilitate
Constellation's hiring of certain employees of the Black Knight
divisions responsible for the Empower LOS and Optimal Blue, to the
extent they were not already included in the divestitures. The D&O
similarly prohibits Respondents from soliciting Constellation employees
who came from Black Knight to work in the divested businesses for two
years. It also prohibits Respondents from enforcing any noncompete or
non-solicit provision or agreement against any employee who seeks or
obtains a position in the divested businesses during the term of the
D&O.
The D&O protects the confidential information of the divested Black
Knight divisions as well as confidential information that Respondents
may learn from Constellation in the course of providing transition
services. These safeguards include limiting the purposes for which
Respondents may use such confidential information and the employees to
whom the information may be disclosed. The D&O facilitates the
execution of NDAs by Black Knight employees who possess confidential
information and who will remain with Respondents post-divestiture, and
it prevents Respondents from allowing any such employees who decline to
sign an NDA from working on an ICE LOS or PPE.
Black Knight and Constellation have agreed that Black Knight will
finance a portion of Constellation's purchase price of Optimal Blue via
a promissory note. In order to ensure that Respondents do not have a
continuing entanglement with Constellation based on the promissory
note, the D&O provides that the Commission will appoint a seller note
trustee no later than one day after the divestiture closes. Not later
than ten days after the Commission appoints the trustee, Respondents
must transfer their rights, title, and interest in the promissory note
to the trustee. The trustee will sell the note to a third party within
six months of the divestiture.
The D&O requires Respondents to obtain prior approval from the
Commission before reacquiring any divested assets or acquiring an
interest in any business that owns or sells an LOS for ten years. The
D&O also requires Respondents to provide the Commission with prior
notice before acquiring an interest in any business that owns or sells
a PPE for ten years. The D&O requires Constellation to obtain prior
approval from the Commission before selling any of the divested assets
for three years after the divestitures and for another seven years if
the acquiring firm operates an LOS or PPE. Finally, the D&O provides
for the appointment of an independent monitor to oversee compliance
with the D&O's requirements.
The purpose of this analysis is to facilitate public comment on the
Consent Agreement, and the Commission does not intend this analysis to
constitute an official interpretation of the Consent Agreement or the
D&O or modify their terms in any way.
By direction of the Commission.
April J. Tabor,
Secretary.
[FR Doc. 2023-19534 Filed 9-8-23; 8:45 am]
BILLING CODE 6750-01-P
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</html>Indexed from Federal Register on September 11, 2023.
This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.