CoStar Group, Inc., Lonestar Acquisition Sub, Inc., and LoopNet, Inc.; Analysis of Agreement Containing Consent Order To Aid Public Comment, 26009-26012 [2012-10550]
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Federal Register / Vol. 77, No. 85 / Wednesday, May 2, 2012 / Notices
Board of Governors of the Federal Reserve
System, April 26, 2012.
Margaret McCloskey Shanks,
Associate Secretary of the Board.
FEDERAL MARITIME COMMISSION
Ocean Transportation Intermediary
License Revocation
The Federal Maritime Commission
hereby gives notice that the following
Ocean Transportation Intermediary
license has been revoked pursuant to
section 19 of the Shipping Act of 1984
(46 U.S.C. chapter 409) and the
regulations of the Commission
pertaining to the licensing of Ocean
Transportation Intermediaries, 46 CFR
part 515, effective on the corresponding
date shown below:
License Number: 022268NF.
Name: USI–USA, Inc.
Address: 13030 Fellowship Way,
Reno, NV 89511.
Date Revoked: March 7, 2012.
Reason: Voluntarily surrendered
license.
Vern W. Hill,
Director, Bureau of Certification and
Licensing.
[FR Doc. 2012–10605 Filed 5–1–12; 8:45 am]
BILLING CODE 6730–01–P
[FR Doc. 2012–10476 Filed 5–1–12; 8:45 am]
BILLING CODE 6210–01–P
FEDERAL TRADE COMMISSION
[File No. 111 0172]
CoStar Group, Inc., Lonestar
Acquisition Sub, Inc., and LoopNet,
Inc.; Analysis of Agreement Containing
Consent Order To Aid Public Comment
Federal Trade Commission.
Proposed Consent Agreement.
AGENCY:
ACTION:
The consent agreement in this
matter settles alleged violations of
federal law prohibiting unfair or
deceptive acts or practices or unfair
methods of competition. The attached
Analysis to Aid Public Comment
describes both the allegations in the
draft complaint and the terms of the
consent order—embodied in the consent
agreement—that would settle these
allegations.
SUMMARY:
Comments must be received on
or before May 29, 2012.
ADDRESSES: Interested parties may file a
comment online or on paper, by
following the instructions in the
Request for Comment part of the
SUPPLEMENTARY INFORMATION section
below. Write ACoStar LoopNet, File No.
111 0172’’ on your comment, and file
your comment online at https://
ftcpublic.commentworks.com/ftc/
costarloopnetconsent, by following the
instructions on the web-based form. If
you prefer to file your comment on
paper, mail or deliver your comment to
the following address: Federal Trade
Commission, Office of the Secretary,
Room H–113 (Annex D), 600
Pennsylvania Avenue NW., Washington,
DC 20580.
FOR FURTHER INFORMATION CONTACT:
Justin A. Stewart-Teitelbaum (202–326–
3597), FTC, Bureau of Competition, 600
Pennsylvania Avenue NW., Washington,
DC 20580.
SUPPLEMENTARY INFORMATION: Pursuant
to section 6(f) of the Federal Trade
Commission Act, 38 Stat. 721, 15 U.S.C.
46(f), and § 2.34 the Commission Rules
of Practice, 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 thirty (30) days. The following
DATES:
FEDERAL RESERVE SYSTEM
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Change in Bank Control Notices;
Acquisitions of Shares of a Savings
and Loan Holding Company
The notificants listed below have
applied under the Change in Bank
Control Act (12 U.S.C. 1817(j)) and the
Board’s Regulation LL (12 CFR part 238)
to acquire shares of a savings and loan
holding company. The factors that are
considered in acting on the notices are
set forth in paragraph 7 of the Act (12
U.S.C. 1817(j)(7)).
The notices are available for
immediate inspection at the Federal
Reserve Bank indicated. The notices
also will be available for inspection at
the offices of the Board of Governors.
Interested persons may express their
views in writing to the Reserve Bank
indicated for that notice or to the offices
of the Board of Governors. Comments
must be received not later than May 16,
2012.
A. Federal Reserve Bank of Boston
(Richard Walker, Community Affairs
Officer) 600 Atlantic Avenue, Boston,
Massachusetts 02210–2204:
1. Frederick W. Tausch, Merrimack,
New Hampshire; to acquire voting
shares of Monadnock Bancorp, Inc., and
thereby indirectly acquire voting shares
of Monadnock Community Bank, both
in Peterborough, New Hampshire.
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26009
Analysis 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
Home Page (for April 26, 2012), on the
World Wide Web, at https://www.ftc.gov/
os/actions.shtm. A paper copy can be
obtained from the FTC Public Reference
Room, Room 130–H, 600 Pennsylvania
Avenue NW., Washington, DC 20580,
either in person or by calling (202) 326–
2222.
You can file a comment online or on
paper. For the Commission to consider
your comment, we must receive it on or
before April 16, 2012. Write ACoStar
LoopNet, File No. 111 0172’’ on your
comment. Your comment B including
your name and your state B will be
placed on the public record of this
proceeding, including, to the extent
practicable, on the public Commission
Web site, at https://www.ftc.gov/os/
publiccomments.shtm. As a matter of
discretion, the Commission tries to
remove individuals’ home contact
information from comments before
placing them on the Commission Web
site.
Because your comment will be made
public, you are solely responsible for
making sure that your comment does
not include any sensitive personal
information, like anyone’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 that your comment does
not include any sensitive health
information, like medical records or
other individually identifiable health
information. In addition, do not include
any ‘‘[t]rade secret or any commercial or
financial information which is obtained
from any person and which is privileged
or confidential,’’ as provided in Section
6(f) of the FTC Act, 15 U.S.C. 46(f), and
FTC Rule 4.10(a)(2), 16 CFR 4.10(a)(2).
In particular, do not include
competitively sensitive information
such as costs, sales statistics,
inventories, formulas, patterns, devices,
manufacturing processes, or customer
names.
If you want the Commission to give
your comment confidential treatment,
you must file it in paper form, with a
request for confidential treatment, and
you have to follow the procedure
explained in FTC Rule 4.9(c), 16 CFR
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4.9(c).1 Your comment will be kept
confidential only if the FTC General
Counsel, in his or her sole discretion,
grants your request in accordance with
the law and the public interest.
Postal mail addressed to the
Commission is subject to delay due to
heightened security screening. As a
result, we encourage you to submit your
comments online. To make sure that the
Commission considers your online
comment, you must file it at https://
ftcpublic.commentworks.com/ftc/
costarloopnetconsent by following the
instructions on the web-based form. If
this Notice appears at https://
www.regulations.gov/#!home, you also
may file a comment through that Web
site.
If you file your comment on paper,
write ACoStar LoopNet, File No. 111
0172’’ on your comment and on the
envelope, and mail or deliver it to the
following address: Federal Trade
Commission, Office of the Secretary,
Room H–113 (Annex D), 600
Pennsylvania Avenue NW., Washington,
DC 20580. If possible, submit your
paper comment to the Commission by
courier or overnight service.
Visit the Commission Web site at
https://www.ftc.gov to read this Notice
and the news release describing it. The
FTC Act and other laws that 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 that it receives on or
before May 29, 2012. You can find more
information, including routine uses
permitted by the Privacy Act, in the
Commission’s privacy policy, at https://
www.ftc.gov/ftc/privacy.htm.
Analysis of Agreement Containing
Consent Order To Aid Public Comment
The Federal Trade Commission has
accepted for public comment, subject to
final approval, an Agreement
Containing Consent Order (‘‘Consent
Agreement’’) from CoStar Group, Inc.
(‘‘CoStar’’), Lonestar Acquisition Sub,
Inc., and LoopNet, Inc. (‘‘LoopNet’’)
(collectively, ‘‘Respondents’’). Pursuant
to an Agreement and Plan of Merger
dated April 27, 2011, Lonestar
Acquisition Sub, Inc., a wholly-owned
subsidiary of CoStar, intends to acquire
all of the common stock of LoopNet in
exchange for cash and stock
considerations with a total equity value
1 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 4.9(c), 16 CFR 4.9(c).
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of approximately $860 million (the
‘‘acquisition’’). The Commission’s
Complaint alleges that CoStar and
LoopNet have entered into an
acquisition agreement that constitutes a
violation of Section 5 of the Federal
Trade Commission Act, as amended, 15
U.S.C. 45, and which, if consummated,
would violate Section 7 of the Clayton
Act, as amended, 15 U.S.C. 18 and
Section 5 of the Federal Trade
Commission Act, by eliminating actual,
direct, and substantial competition
between CoStar and LoopNet, and
between CoStar and Xceligent, Inc.
(‘‘Xceligent’’), and increasing the
likelihood that CoStar will exercise
market power unilaterally in the
provision of commercial real estate
(‘‘CRE’’) listings databases and
information services.
The proposed Consent Agreement
would resolve these competitive
concerns by requiring the divestiture of
LoopNet’s interest in Xceligent, CoStar’s
most direct competitor on a product
basis. Owing to the circumstances
surrounding the acquisition and the
characteristics of the industry at issue,
the proposed Consent Agreement
further imposes certain conduct
requirements to assure the continued
viability of Xceligent as a competitor to
the merged firm and to reduce barriers
to competitive entry and expansion.
These additional provisions will
facilitate Xceligent’s geographic
expansion and prevent foreclosure of
Respondents’ established customer base.
Together, the divestiture and conduct
obligations will make Xceligent a
stronger independent competitor to the
merged firm. The proposed Consent
Agreement will thus remedy the loss or
diminution of competition that would
result from the acquisition.
The proposed Consent Agreement has
been placed on the public record for
thirty (30) days to solicit comments
from interested persons. Comments
received during this period will become
part of the public record. After thirty
(30) days, the Commission will again
review the proposed Consent Agreement
and the comments received, and will
decide whether it should withdraw from
the proposed Consent Agreement,
modify it, or make final the proposed
Decision and Order (‘‘Order’’).
The sole purpose of this analysis is to
facilitate public comment on the
Consent Agreement. The analysis does
not constitute an official interpretation
of the Consent Agreement or the
proposed Order, nor does the analysis
modify their terms in any way.
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I. Respondents and Other Relevant
Entities
A. CoStar
CoStar is the largest provider of CRE
information services in the United
States, offering a researched listings
database with nationwide coverage.
CoStar proactively tracks and aggregates
CRE listings and information to create
and maintain an in-depth and
comprehensive CRE database. CoStar is
a publicly traded, for-profit corporation.
B. LoopNet
LoopNet operates the most heavily
trafficked CRE listings database in the
United States. LoopNet provides a
platform for CRE market participants to
post listings and other detailed
information about available properties,
and aggregates that user-generated
content into a database searchable by
the public. Through this platform,
LoopNet also offers some CRE
information services with nationwide
coverage. LoopNet is a publicly traded,
for-profit corporation.
Starting in 2007, LoopNet acquired a
substantial ownership stake in
Xceligent, a provider of CRE
information and listings services, with
coverage focused on the Midwest and
South. Today, LoopNet provides
Xceligent with funding and information
to aid Xceligent in expanding its
geographic scope.
C. Xceligent
Xceligent, a privately held
corporation, is a third leading provider
of CRE information services in the
United States, offering a researched
listings database. Xceligent’s model
closely resembles CoStar’s, with a
research staff that proactively tracks and
aggregates CRE listings and information
to create and maintain an in-depth and
comprehensive CRE database.
II. The Proposed Complaint
CoStar’s acquisition of LoopNet
presents antitrust concerns in the
markets for CRE listings databases and
CRE information services. Listings
databases provide a means for parties to
CRE transactions to publicize and to
search for available properties for sale
and for lease. CRE information services
compile the data industry participants
need to evaluate CRE assets and
opportunities, informing decisions
ranging from the determination of
asking price to whether to execute a
given sale or lease agreement. Real
estate brokers, lenders, investors,
developers, appraisers, government
agencies, and others connected to the
CRE industry require listings databases
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and information services with
geographic coverage that corresponds to
their unique scope of operations. The
coverage needs of a given customer may
be as broad as the entire United States,
or as narrow as a city neighborhood.
CoStar and LoopNet are the only two
providers of CRE listings databases with
nationwide coverage. CoStar is the only
current provider of full-inventory,
research verified CRE listings databases
and information services with national
coverage. CoStar’s closest competitor on
a product basis, Xceligent, today
provides full-inventory, researchverified listings databases and
information services in 33 metropolitan
areas. Other providers offer CRE listings
databases and information services with
coverage of a particular local or regional
area or of a particular subset of the total
CRE landscape, but none have achieved
the critical mass of users and data that
CoStar and LoopNet possess today.
The acquisition may substantially
lessen competition in these relevant
markets by eliminating actual, direct,
and substantial competition between
CoStar and LoopNet, and between
CoStar and Xceligent because of
LoopNet’s substantial ownership stake
in Xceligent. The acquisition therefore
may also increase the likelihood that
CoStar will exercise market power
unilaterally.
Timely, competitively meaningful
entry is unlikely to mitigate these
anticompetitive effects. Significant
network effects characterize the market
for CRE listings databases and create a
substantial barrier to new entry. For
both listings databases and information
services, entry and expansion are
difficult, costly, and time-consuming.
III. The Proposed Consent Agreement
The proposed Consent Agreement and
the Order include the obligation to
divest certain LoopNet data to Xceligent
and conduct requirements that may
modify Respondents’ current and future
contractual agreements with its
customers. These provisions are
intended to ensure that the remedy is
responsive to the history and
characteristics of the relevant markets.
The Order incorporates these carefullytailored provisions to assure the
successful implementation of the
remedy and to effectuate the Order’s
remedial purpose. Some of these
provisions are highlighted below.
A. Divestitures
The proposed Consent Agreement is
intended to remedy the acquisition’s
alleged anticompetitive effects by,
among other things, requiring the
divestiture of LoopNet’s interest in
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Xceligent to DMG Information, Inc.
(‘‘DMGI’’). DMGI is a U.S.-based
subsidiary of British media and data
conglomerate Daily Mail & General
Trust, PLC, a publicly traded, for-profit
firm with 2011 revenues of nearly £2
billion. DMGI specializes in business-tobusiness information services and has
significant experience in the CRE
information space. DMGI’s strong,
existing presence in the CRE
information space includes substantial
and long-standing investments in CRE
information firms including Trepp, LLC;
Real Capital Analytics, Inc.;
Environmental Data Resources, Inc.; and
BUILDERadius, Inc.
Respondents have reached an
agreement to sell to DMGI LoopNet’s
interest in Xceligent and in the URL ‘‘
commercialsearch.com.’’ In addition to
these assets, Respondents have agreed to
divest to DMGI certain LoopNet data
that will facilitate Xceligent’s expansion
into new metropolitan areas. The need
for this data divestiture arises from the
unique historical relationship between
LoopNet and Xceligent and from the
high initial costs associated with entry
and expansion in the relevant markets.
These divestitures assure the continued
viability of Xceligent as CoStar’s
competitor and enable Xceligent to grow
rapidly into a more complete, national
listings database and information
services alternative to the merged firm.
DMGI is well-equipped to replace
LoopNet and become the controlling
shareholder of Xceligent. DMGI has the
resources and capability to provide
Xceligent with the financial and
strategic assistance required for effective
and efficient continued expansion. The
divestitures will therefore preserve the
existing competition between CoStar
and Xceligent and will allow Xceligent
to replace any competition lost between
CoStar and LoopNet as a result of the
acquisition.
B. Conduct Provisions
The Order imposes certain conduct
requirements that will lower entry
barriers to the markets for CRE listings
databases and information services.
Paragraph III.A. of the Order prevents
Respondents from restricting, directly or
indirectly, customers’ ability to support
Xceligent. The history and data-driven
nature of the relevant markets, coupled
with the high costs of data collection
and the network effects inherent in the
industry, have led to significant barriers
to entry and expansion. Paragraph III.A.
ensures that industry participants,
including the largest national CRE
brokerage firms, can bolster entry
efforts—whether through financial
investment, CRE information-sharing, or
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26011
public endorsement—without fear of
reprisal. This provision thus reduces
entry barriers by allowing industry
participants to assist in the development
and growth of Xceligent.
In order to prevent long-term CoStar
subscription commitments from
foreclosing competitive entry or
expansion, Paragraph III.B. of the Order
requires Respondents to allow current
and future customers, without penalty,
to terminate their existing contracts
with twelve (12) months’ notice. This
provision ensures that Xceligent has
available customers in any and all
metropolitan areas where they offer
competing products. The resulting
revenue opportunities and feasibility of
gaining broad customer acceptance will
make entry or expansion into local
coverage areas more efficient and
effective.
Similarly, Paragraphs III.F. and III.G.
of the Order include provisions that aim
to protect Xceligent for a limited period
while it expands the breadth and
geographic scope of its services. These
restrictions are necessary because of the
importance of such expansion in
ensuring an effective remedy. Paragraph
III.F. prevents Respondents from
conditioning the sale, lease, or license
of, or the subscription to, any of
Respondents’ products on the sale,
lease, or license of, or the subscription
to, any other of Respondents’ products.
Paragraph III.F. also prohibits
Respondents from requiring customers
to subscribe to multiple geographic
coverage areas in order to gain access to
a single coverage area of interest. These
protections extend for a period of five
(5) years post-acquisition. Paragraph
III.F. also requires Respondents to
continue to offer all currently available
products on a stand-alone basis for three
(3) years post-acquisition. A related
provision, Paragraph III.G., prohibits
Respondents from limiting the use of
the REApplications product, a software
tool for managing market research. For
three (3) years after the Order date, if
Respondents continue to offer
REApplications, Paragraph III.G.
provides that customers shall be
permitted to use REApplications in
support of, or in connection with, their
purchase, lease, or license of CRE
database services from Respondents’
competitors. Together, Paragraphs III.F.
and III.G. ensure that customers are free
to turn to Xceligent or other firms for
the services those firms provide,
without forfeiting their access to other
CoStar products on which they rely.
These provisions therefore advance the
Order’s remedial purpose in recognition
of, and in response to, the relatedness of
the products at issue, the indispensable
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nature of those products, and the
currently limited selection of providers
to customers of those products.
Paragraphs III.C. and III.D. of the
Order provide certain protections to
Respondents’ current and future
customers so that they are free to avail
themselves of their rights and
opportunities post-acquisition.
Paragraph III.C. prohibits Respondents
from intentionally disrupting or limiting
service to customers except in specific,
enumerated circumstances. This
provision ensures that Respondents’
customers are protected in their ability
to conduct their day-to-day business by
designating inappropriate suspension of
service as a retaliatory act punishable
under Paragraph III.H. of the Order. In
order to address the possible chilling
effects of the industry’s historically
litigious reputation, Paragraph III.D.
grants Respondents’ current and future
customers the right to resolve any
disputes with Respondents through
arbitration.
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C. Compliance and Notification
Requirements
Paragraph V. of the Order requires
Respondents to provide notice to the
Federal Trade Commission thirty (30)
days prior to any planned acquisition of
any firm that gathers, markets, or sells
CRE listings or CRE information in the
United States for a period of five (5)
years. For an additional five years
thereafter, the Order requires
Respondents to provide prior notice of
planned acquisitions of any such firms
with revenues of $15 million or greater.
Paragraph VI. of the Order appoints
Guy Dorey as Monitor to assure
Respondents’ ongoing compliance with
their obligations and responsibilities
under the Order. Among other
responsibilities, Paragraph VI.
empowers the Monitor, at Respondents’
expense, to review and audit
compliance with Order provisions
relating to the divestitures of assets and
information and to customers’ rights to
support Xceligent.
To assure that Respondents fully
comply with the obligations of
Paragraph II. of the Order, Paragraph
VII. of the Order allows the Commission
to appoint a Divestiture Trustee to
assign, grant, license, divest, transfer,
deliver, or otherwise convey the
relevant assets and information.
Paragraph VIII. of the Order requires
Respondents to submit periodic reports
of compliance. The Order requires
reporting every sixty (60) days for two
(2) years following the Order date, and
annually thereafter until the Order
terminates in ten (10) years.
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Paragraph IX. of the Order requires
Respondents to give the Commission
prior notice of certain events that might
affect compliance obligations arising
from the Order.
D. Additional Provisions
Paragraph X. of the Order provides
that the Order shall terminate after ten
(10) years.
The purpose of this analysis is to aid
public comment on the proposed order.
It is not intended to constitute an
official interpretation of the complaint
or proposed order, or to modify in any
way the proposed order’s terms.
By direction of the Commission,
Commissioner Ohlhausen not participating.
Donald S. Clark,
Secretary.
[FR Doc. 2012–10550 Filed 5–1–12; 8:45 am]
BILLING CODE 6750–01–P
DEPARTMENT OF HEALTH AND
HUMAN SERVICES
Public Meeting of the Presidential
Commission for the Study of
Bioethical Issues
Presidential Commission for
the Study of Bioethical Issues, Office of
the Assistant Secretary for Health,
Office of the Secretary, Department of
Health and Human Services.
ACTION: Notice of meeting.
AGENCY:
The Presidential Commission
for the Study of Bioethical Issues will
conduct its ninth meeting in May. At
this meeting, the Commission will
discuss topics related to the ethical
issues associated with the development
of medical countermeasures for children
as well as access to, and privacy of,
human genome sequence data.
DATES: The meeting will take place on
Thursday, May 17, 2012, from 9 a.m. to
approximately 5:30 p.m.
ADDRESSES: The Embassy Row Hotel,
2015 Massachusetts Ave. NW.,
Washington, DC 20036. Telephone:
(202) 265–1600.
FOR FURTHER INFORMATION CONTACT:
Hillary Wicai Viers, Communications
Director, Presidential Commission for
the Study of Bioethical Issues, 1425
New York Ave. NW., Suite C–100,
Washington, DC 20005. Telephone:
(202) 233–3960. Email:
Hillary.Viers@bioethics.gov. Additional
information may be obtained at
www.bioethics.gov.
SUPPLEMENTARY INFORMATION: Pursuant
to the Federal Advisory Committee Act
of 1972, Public Law 92–463, 5 U.S.C.
app. 2, notice is hereby given of the
SUMMARY:
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ninth meeting of the Presidential
Commission for the Study of Bioethical
Issues (the Commission). The meeting
will be open to the public with
attendance limited to available space.
The meeting will also be webcast at
https://www.bioethics.gov.
Under authority of Executive Order
13521, dated November 24, 2009, the
President established the Commission.
The Commission is an advisory panel of
the nation’s leaders in medicine,
science, ethics, religion, law, and
engineering. The Commission advises
the President on bioethical issues
arising from advances in biomedicine
and related areas of science and
technology. The Commission seeks to
identify and promote policies and
practices that ensure scientific research,
health care delivery, and technological
innovation are conducted in a socially
and ethically responsible manner.
The main agenda items for the
Commission’s ninth meeting are, first, to
discuss the ethical issues associated
with the development of medical
countermeasures for children, and
second, to discuss issues of privacy of,
and access to, human genome sequence
data.
The draft meeting agenda and other
information about the Commission,
including information about access to
the webcast, will be available at
https://www.bioethics.gov.
The Commission welcomes input
from anyone wishing to provide public
comment on any issue before it.
Respectful debate of opposing views
and active participation by citizens in
public exchange of ideas enhances
overall public understanding of the
issues at hand and conclusions reached
by the Commission. The Commission is
particularly interested in receiving
comments and questions during the
meeting that are responsive to specific
sessions. Written comments will be
accepted at the registration desk and
comment forms will be provided to
members of the public in order to write
down questions and comments for the
Commission as they arise. To
accommodate as many individuals as
possible, the time for each question or
comment may be limited. If the number
of individuals wishing to pose a
question or make a comment is greater
than can reasonably be accommodated
during the scheduled meeting, the
Commission may make a random
selection.
Anyone planning to attend the
meeting who needs special assistance,
such as sign language interpretation or
other reasonable accommodations,
should notify Esther Yoo by telephone
at (202) 233–3960, or email at
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]]>Agencies
[Federal Register Volume 77, Number 85 (Wednesday, May 2, 2012)]
[Notices]
[Pages 26009-26012]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-10550]
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FEDERAL TRADE COMMISSION
[File No. 111 0172]
CoStar Group, Inc., Lonestar Acquisition Sub, Inc., and LoopNet,
Inc.; Analysis of Agreement Containing Consent Order To Aid Public
Comment
AGENCY: Federal Trade Commission.
ACTION: Proposed Consent Agreement.
-----------------------------------------------------------------------
SUMMARY: The consent agreement in this matter settles alleged
violations of federal law prohibiting unfair or deceptive acts or
practices or unfair methods of competition. The attached Analysis to
Aid Public Comment describes both the allegations in the draft
complaint and the terms of the consent order--embodied in the consent
agreement--that would settle these allegations.
DATES: Comments must be received on or before May 29, 2012.
ADDRESSES: Interested parties may file a comment online or on paper, by
following the instructions in the Request for Comment part of the
SUPPLEMENTARY INFORMATION section below. Write ACoStar LoopNet, File
No. 111 0172'' on your comment, and file your comment online at https://ftcpublic.commentworks.com/ftc/costarloopnetconsent, by following the
instructions on the web-based form. If you prefer to file your comment
on paper, mail or deliver your comment to the following address:
Federal Trade Commission, Office of the Secretary, Room H-113 (Annex
D), 600 Pennsylvania Avenue NW., Washington, DC 20580.
FOR FURTHER INFORMATION CONTACT: Justin A. Stewart-Teitelbaum (202-326-
3597), FTC, Bureau of Competition, 600 Pennsylvania Avenue NW.,
Washington, DC 20580.
SUPPLEMENTARY INFORMATION: Pursuant to section 6(f) of the Federal
Trade Commission Act, 38 Stat. 721, 15 U.S.C. 46(f), and Sec. 2.34 the
Commission Rules of Practice, 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 thirty (30) days. The following Analysis 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 Home Page
(for April 26, 2012), on the World Wide Web, at https://www.ftc.gov/os/actions.shtm. A paper copy can be obtained from the FTC Public
Reference Room, Room 130-H, 600 Pennsylvania Avenue NW., Washington, DC
20580, either in person or by calling (202) 326-2222.
You can file a comment online or on paper. For the Commission to
consider your comment, we must receive it on or before April 16, 2012.
Write ACoStar LoopNet, File No. 111 0172'' on your comment. Your
comment B including your name and your state B will be placed on the
public record of this proceeding, including, to the extent practicable,
on the public Commission Web site, at https://www.ftc.gov/os/publiccomments.shtm. As a matter of discretion, the Commission tries to
remove individuals' home contact information from comments before
placing them on the Commission Web site.
Because your comment will be made public, you are solely
responsible for making sure that your comment does not include any
sensitive personal information, like anyone'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 that your comment does not include any
sensitive health information, like medical records or other
individually identifiable health information. In addition, do not
include any ``[t]rade secret or any commercial or financial information
which is obtained from any person and which is privileged or
confidential,'' as provided in Section 6(f) of the FTC Act, 15 U.S.C.
46(f), and FTC Rule 4.10(a)(2), 16 CFR 4.10(a)(2). In particular, do
not include competitively sensitive information such as costs, sales
statistics, inventories, formulas, patterns, devices, manufacturing
processes, or customer names.
If you want the Commission to give your comment confidential
treatment, you must file it in paper form, with a request for
confidential treatment, and you have to follow the procedure explained
in FTC Rule 4.9(c), 16 CFR
[[Page 26010]]
4.9(c).\1\ Your comment will be kept confidential only if the FTC
General Counsel, in his or her sole discretion, grants your request in
accordance with the law and the public interest.
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\1\ 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
4.9(c), 16 CFR 4.9(c).
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Postal mail addressed to the Commission is subject to delay due to
heightened security screening. As a result, we encourage you to submit
your comments online. To make sure that the Commission considers your
online comment, you must file it at https://ftcpublic.commentworks.com/ftc/costarloopnetconsent by following the instructions on the web-based
form. If this Notice appears at https://www.regulations.gov/#!home, you
also may file a comment through that Web site.
If you file your comment on paper, write ACoStar LoopNet, File No.
111 0172'' on your comment and on the envelope, and mail or deliver it
to the following address: Federal Trade Commission, Office of the
Secretary, Room H-113 (Annex D), 600 Pennsylvania Avenue NW.,
Washington, DC 20580. If possible, submit your paper comment to the
Commission by courier or overnight service.
Visit the Commission Web site at https://www.ftc.gov to read this
Notice and the news release describing it. The FTC Act and other laws
that 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 that
it receives on or before May 29, 2012. You can find more information,
including routine uses permitted by the Privacy Act, in the
Commission's privacy policy, at https://www.ftc.gov/ftc/privacy.htm.
Analysis of Agreement Containing Consent Order To Aid Public Comment
The Federal Trade Commission has accepted for public comment,
subject to final approval, an Agreement Containing Consent Order
(``Consent Agreement'') from CoStar Group, Inc. (``CoStar''), Lonestar
Acquisition Sub, Inc., and LoopNet, Inc. (``LoopNet'') (collectively,
``Respondents''). Pursuant to an Agreement and Plan of Merger dated
April 27, 2011, Lonestar Acquisition Sub, Inc., a wholly-owned
subsidiary of CoStar, intends to acquire all of the common stock of
LoopNet in exchange for cash and stock considerations with a total
equity value of approximately $860 million (the ``acquisition''). The
Commission's Complaint alleges that CoStar and LoopNet have entered
into an acquisition agreement that constitutes a violation of Section 5
of the Federal Trade Commission Act, as amended, 15 U.S.C. 45, and
which, if consummated, would violate Section 7 of the Clayton Act, as
amended, 15 U.S.C. 18 and Section 5 of the Federal Trade Commission
Act, by eliminating actual, direct, and substantial competition between
CoStar and LoopNet, and between CoStar and Xceligent, Inc.
(``Xceligent''), and increasing the likelihood that CoStar will
exercise market power unilaterally in the provision of commercial real
estate (``CRE'') listings databases and information services.
The proposed Consent Agreement would resolve these competitive
concerns by requiring the divestiture of LoopNet's interest in
Xceligent, CoStar's most direct competitor on a product basis. Owing to
the circumstances surrounding the acquisition and the characteristics
of the industry at issue, the proposed Consent Agreement further
imposes certain conduct requirements to assure the continued viability
of Xceligent as a competitor to the merged firm and to reduce barriers
to competitive entry and expansion. These additional provisions will
facilitate Xceligent's geographic expansion and prevent foreclosure of
Respondents' established customer base. Together, the divestiture and
conduct obligations will make Xceligent a stronger independent
competitor to the merged firm. The proposed Consent Agreement will thus
remedy the loss or diminution of competition that would result from the
acquisition.
The proposed Consent Agreement has been placed on the public record
for thirty (30) days to solicit comments from interested persons.
Comments received during this period will become part of the public
record. After thirty (30) days, the Commission will again review the
proposed Consent Agreement and the comments received, and will decide
whether it should withdraw from the proposed Consent Agreement, modify
it, or make final the proposed Decision and Order (``Order'').
The sole purpose of this analysis is to facilitate public comment
on the Consent Agreement. The analysis does not constitute an official
interpretation of the Consent Agreement or the proposed Order, nor does
the analysis modify their terms in any way.
I. Respondents and Other Relevant Entities
A. CoStar
CoStar is the largest provider of CRE information services in the
United States, offering a researched listings database with nationwide
coverage. CoStar proactively tracks and aggregates CRE listings and
information to create and maintain an in-depth and comprehensive CRE
database. CoStar is a publicly traded, for-profit corporation.
B. LoopNet
LoopNet operates the most heavily trafficked CRE listings database
in the United States. LoopNet provides a platform for CRE market
participants to post listings and other detailed information about
available properties, and aggregates that user-generated content into a
database searchable by the public. Through this platform, LoopNet also
offers some CRE information services with nationwide coverage. LoopNet
is a publicly traded, for-profit corporation.
Starting in 2007, LoopNet acquired a substantial ownership stake in
Xceligent, a provider of CRE information and listings services, with
coverage focused on the Midwest and South. Today, LoopNet provides
Xceligent with funding and information to aid Xceligent in expanding
its geographic scope.
C. Xceligent
Xceligent, a privately held corporation, is a third leading
provider of CRE information services in the United States, offering a
researched listings database. Xceligent's model closely resembles
CoStar's, with a research staff that proactively tracks and aggregates
CRE listings and information to create and maintain an in-depth and
comprehensive CRE database.
II. The Proposed Complaint
CoStar's acquisition of LoopNet presents antitrust concerns in the
markets for CRE listings databases and CRE information services.
Listings databases provide a means for parties to CRE transactions to
publicize and to search for available properties for sale and for
lease. CRE information services compile the data industry participants
need to evaluate CRE assets and opportunities, informing decisions
ranging from the determination of asking price to whether to execute a
given sale or lease agreement. Real estate brokers, lenders, investors,
developers, appraisers, government agencies, and others connected to
the CRE industry require listings databases
[[Page 26011]]
and information services with geographic coverage that corresponds to
their unique scope of operations. The coverage needs of a given
customer may be as broad as the entire United States, or as narrow as a
city neighborhood.
CoStar and LoopNet are the only two providers of CRE listings
databases with nationwide coverage. CoStar is the only current provider
of full-inventory, research verified CRE listings databases and
information services with national coverage. CoStar's closest
competitor on a product basis, Xceligent, today provides full-
inventory, research-verified listings databases and information
services in 33 metropolitan areas. Other providers offer CRE listings
databases and information services with coverage of a particular local
or regional area or of a particular subset of the total CRE landscape,
but none have achieved the critical mass of users and data that CoStar
and LoopNet possess today.
The acquisition may substantially lessen competition in these
relevant markets by eliminating actual, direct, and substantial
competition between CoStar and LoopNet, and between CoStar and
Xceligent because of LoopNet's substantial ownership stake in
Xceligent. The acquisition therefore may also increase the likelihood
that CoStar will exercise market power unilaterally.
Timely, competitively meaningful entry is unlikely to mitigate
these anticompetitive effects. Significant network effects characterize
the market for CRE listings databases and create a substantial barrier
to new entry. For both listings databases and information services,
entry and expansion are difficult, costly, and time-consuming.
III. The Proposed Consent Agreement
The proposed Consent Agreement and the Order include the obligation
to divest certain LoopNet data to Xceligent and conduct requirements
that may modify Respondents' current and future contractual agreements
with its customers. These provisions are intended to ensure that the
remedy is responsive to the history and characteristics of the relevant
markets. The Order incorporates these carefully-tailored provisions to
assure the successful implementation of the remedy and to effectuate
the Order's remedial purpose. Some of these provisions are highlighted
below.
A. Divestitures
The proposed Consent Agreement is intended to remedy the
acquisition's alleged anticompetitive effects by, among other things,
requiring the divestiture of LoopNet's interest in Xceligent to DMG
Information, Inc. (``DMGI''). DMGI is a U.S.-based subsidiary of
British media and data conglomerate Daily Mail & General Trust, PLC, a
publicly traded, for-profit firm with 2011 revenues of nearly [pound]2
billion. DMGI specializes in business-to-business information services
and has significant experience in the CRE information space. DMGI's
strong, existing presence in the CRE information space includes
substantial and long-standing investments in CRE information firms
including Trepp, LLC; Real Capital Analytics, Inc.; Environmental Data
Resources, Inc.; and BUILDERadius, Inc.
Respondents have reached an agreement to sell to DMGI LoopNet's
interest in Xceligent and in the URL ``commercialsearch.com.'' In
addition to these assets, Respondents have agreed to divest to DMGI
certain LoopNet data that will facilitate Xceligent's expansion into
new metropolitan areas. The need for this data divestiture arises from
the unique historical relationship between LoopNet and Xceligent and
from the high initial costs associated with entry and expansion in the
relevant markets. These divestitures assure the continued viability of
Xceligent as CoStar's competitor and enable Xceligent to grow rapidly
into a more complete, national listings database and information
services alternative to the merged firm. DMGI is well-equipped to
replace LoopNet and become the controlling shareholder of Xceligent.
DMGI has the resources and capability to provide Xceligent with the
financial and strategic assistance required for effective and efficient
continued expansion. The divestitures will therefore preserve the
existing competition between CoStar and Xceligent and will allow
Xceligent to replace any competition lost between CoStar and LoopNet as
a result of the acquisition.
B. Conduct Provisions
The Order imposes certain conduct requirements that will lower
entry barriers to the markets for CRE listings databases and
information services. Paragraph III.A. of the Order prevents
Respondents from restricting, directly or indirectly, customers'
ability to support Xceligent. The history and data-driven nature of the
relevant markets, coupled with the high costs of data collection and
the network effects inherent in the industry, have led to significant
barriers to entry and expansion. Paragraph III.A. ensures that industry
participants, including the largest national CRE brokerage firms, can
bolster entry efforts--whether through financial investment, CRE
information-sharing, or public endorsement--without fear of reprisal.
This provision thus reduces entry barriers by allowing industry
participants to assist in the development and growth of Xceligent.
In order to prevent long-term CoStar subscription commitments from
foreclosing competitive entry or expansion, Paragraph III.B. of the
Order requires Respondents to allow current and future customers,
without penalty, to terminate their existing contracts with twelve (12)
months' notice. This provision ensures that Xceligent has available
customers in any and all metropolitan areas where they offer competing
products. The resulting revenue opportunities and feasibility of
gaining broad customer acceptance will make entry or expansion into
local coverage areas more efficient and effective.
Similarly, Paragraphs III.F. and III.G. of the Order include
provisions that aim to protect Xceligent for a limited period while it
expands the breadth and geographic scope of its services. These
restrictions are necessary because of the importance of such expansion
in ensuring an effective remedy. Paragraph III.F. prevents Respondents
from conditioning the sale, lease, or license of, or the subscription
to, any of Respondents' products on the sale, lease, or license of, or
the subscription to, any other of Respondents' products. Paragraph
III.F. also prohibits Respondents from requiring customers to subscribe
to multiple geographic coverage areas in order to gain access to a
single coverage area of interest. These protections extend for a period
of five (5) years post-acquisition. Paragraph III.F. also requires
Respondents to continue to offer all currently available products on a
stand-alone basis for three (3) years post-acquisition. A related
provision, Paragraph III.G., prohibits Respondents from limiting the
use of the REApplications product, a software tool for managing market
research. For three (3) years after the Order date, if Respondents
continue to offer REApplications, Paragraph III.G. provides that
customers shall be permitted to use REApplications in support of, or in
connection with, their purchase, lease, or license of CRE database
services from Respondents' competitors. Together, Paragraphs III.F. and
III.G. ensure that customers are free to turn to Xceligent or other
firms for the services those firms provide, without forfeiting their
access to other CoStar products on which they rely. These provisions
therefore advance the Order's remedial purpose in recognition of, and
in response to, the relatedness of the products at issue, the
indispensable
[[Page 26012]]
nature of those products, and the currently limited selection of
providers to customers of those products.
Paragraphs III.C. and III.D. of the Order provide certain
protections to Respondents' current and future customers so that they
are free to avail themselves of their rights and opportunities post-
acquisition. Paragraph III.C. prohibits Respondents from intentionally
disrupting or limiting service to customers except in specific,
enumerated circumstances. This provision ensures that Respondents'
customers are protected in their ability to conduct their day-to-day
business by designating inappropriate suspension of service as a
retaliatory act punishable under Paragraph III.H. of the Order. In
order to address the possible chilling effects of the industry's
historically litigious reputation, Paragraph III.D. grants Respondents'
current and future customers the right to resolve any disputes with
Respondents through arbitration.
C. Compliance and Notification Requirements
Paragraph V. of the Order requires Respondents to provide notice to
the Federal Trade Commission thirty (30) days prior to any planned
acquisition of any firm that gathers, markets, or sells CRE listings or
CRE information in the United States for a period of five (5) years.
For an additional five years thereafter, the Order requires Respondents
to provide prior notice of planned acquisitions of any such firms with
revenues of $15 million or greater.
Paragraph VI. of the Order appoints Guy Dorey as Monitor to assure
Respondents' ongoing compliance with their obligations and
responsibilities under the Order. Among other responsibilities,
Paragraph VI. empowers the Monitor, at Respondents' expense, to review
and audit compliance with Order provisions relating to the divestitures
of assets and information and to customers' rights to support
Xceligent.
To assure that Respondents fully comply with the obligations of
Paragraph II. of the Order, Paragraph VII. of the Order allows the
Commission to appoint a Divestiture Trustee to assign, grant, license,
divest, transfer, deliver, or otherwise convey the relevant assets and
information.
Paragraph VIII. of the Order requires Respondents to submit
periodic reports of compliance. The Order requires reporting every
sixty (60) days for two (2) years following the Order date, and
annually thereafter until the Order terminates in ten (10) years.
Paragraph IX. of the Order requires Respondents to give the
Commission prior notice of certain events that might affect compliance
obligations arising from the Order.
D. Additional Provisions
Paragraph X. of the Order provides that the Order shall terminate
after ten (10) years.
The purpose of this analysis is to aid public comment on the
proposed order. It is not intended to constitute an official
interpretation of the complaint or proposed order, or to modify in any
way the proposed order's terms.
By direction of the Commission, Commissioner Ohlhausen not
participating.
Donald S. Clark,
Secretary.
[FR Doc. 2012-10550 Filed 5-1-12; 8:45 am]
BILLING CODE 6750-01-P
