Fidelity National Financial, Inc./Lender Processing Services, Inc.; Analysis of Agreement Containing Consent Orders to Aid Public Comment, 134-139 [2013-31331]

Agencies

• FEDERAL TRADE COMMISSION

[Federal Register Volume 79, Number 1 (Thursday, January 2, 2014)]
[Notices]
[Pages 134-139]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-31331]


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Federal Trade Commission

[File No. 131 0159]


Fidelity National Financial, Inc./Lender Processing Services, 
Inc.; Analysis of Agreement Containing Consent Orders to Aid Public 
Comment

AGENCY: Federal Trade Commission.

ACTION: Proposed consent agreement.

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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 of 
Agreement Containing Consent Orders to Aid Public Comment describes 
both the allegations in the draft 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 January 23, 2014.

ADDRESSES: Interested parties may file a comment at https://ftcpublic.commentworks.com/ftc/fidelitynationalconsent online or on 
paper, by following the instructions in the Request for Comment part of 
the SUPPLEMENTARY INFORMATION section below. Write ``Fidelity National 
Financial, Inc./Lender Processing Services, Inc.--Consent Agreement; 
File No. 131 0159'' on your comment and file your comment online at 
https://ftcpublic.commentworks.com/ftc/fidelitynationalconsent 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: Jessica S. Drake, Bureau of 
Competition, (202-326-3144), 600 Pennsylvania Avenue NW., Washington, 
DC 20580.

SUPPLEMENTARY INFORMATION: Pursuant to Section 6(f) of the Federal 
Trade Commission Act, 15 U.S.C. 46(f), and FTC Rule 2.34, 16 CFR 2.34, 
notice is hereby given that the above-captioned consent agreement 
containing consent orders 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 December 24, 2013), 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 January 23, 
2014. Write ``Fidelity National Financial, Inc./Lender Processing 
Services, Inc.--Consent Agreement; File No. 131 0159'' 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 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

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privileged or confidential,'' as discussed 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 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/fidelitynationalconsent 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 ``Fidelity National 
Financial, Inc./Lender Processing Services, Inc.--Consent Agreement; 
File No. 131 0159'' 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 January 23, 2014. 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 Orders To Aid Public Comment

I. Introduction

    The Federal Trade Commission (``Commission'' or ``FTC'') has 
accepted, subject to final approval, an Agreement Containing Consent 
Order (``Consent Agreement'') from Fidelity National Financial, Inc. 
(``Fidelity'') and Lender Processing Services, Inc. (``LPS'') 
(collectively, ``Respondents''). Fidelity proposes to acquire LPS, a 
combination that would reduce competition in seven relevant markets in 
Oregon where Respondents own overlapping title plant assets. The 
proposed Consent Agreement remedies the competitive concerns arising 
from the acquisition. The proposed Consent Agreement requires, among 
other things, that Respondents divest: A copy of LPS's title plants 
covering Clatsop, Columbia, Coos, Josephine, Polk, and Tillamook 
counties in Oregon; and an ownership interest equivalent to LPS's share 
in a joint title plant serving the Portland, Oregon, metropolitan area.
    On May 28, 2013, Respondents entered into an acquisition agreement 
under which Fidelity would acquire all of the outstanding common stock 
of LPS for approximately $2.9 billion (the ``Acquisition''). The 
Commission's Complaint alleges that the acquisition agreement 
constitutes a violation of Section 5 of the Federal Trade Commission 
Act, as amended, 15 U.S.C. 45, and, 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 Respondents and by increasing the 
likelihood of collusion or coordinated interaction in the relevant 
geographic markets.

II. The Parties

    Fidelity, a publicly traded company headquartered in Jacksonville, 
Florida, provides title insurance, transaction services, and technology 
solutions to the mortgage industry. Fidelity is the nation's largest 
title insurance company, operating six underwriting subsidiaries.
    LPS, a publicly traded company headquartered in Jacksonville, 
Florida, provides transaction services and technology solutions to the 
mortgage industry. LPS's transaction services include title insurance 
underwriting provided by its National Title Insurance of New York, Inc. 
(``NTNY'') subsidiary.
    Respondents own overlapping title plants in Clatsop, Columbia, 
Coos, Josephine, Polk, and Tillamook counties, Oregon. Fidelity and LPS 
are also partners in a title plant serving the tri-county Portland, 
Oregon, metropolitan area, consisting of Clackamas, Multnomah, and 
Washington counties.

III. Title Information Services

    Lenders require assurance of title before issuing a mortgage loan, 
typically in the form of title insurance. Title insurance protects 
against the risk that a sale of real property fails to result in the 
transfer of clear title. Before a title insurance policy can issue, a 
title agent or abstractor must first conduct a title search. Title 
search is the due diligence process that enables title insurance 
underwriters to assess (and mitigate, if necessary) the risk of 
subsequent title challenges. The title agent or abstractor examines 
property-specific records to establish the chain of title and to 
identify any potential obstacles--such as liens or encumbrances--that 
might impair the transfer of title.
    To facilitate the title search process, title agents and 
underwriters often utilize title plants. Title plants are privately-
owned (either individually or jointly) databases of information 
detailing the title status of real property parcels. Title plants 
compile, normalize, and re-index county-level property records, which 
are often difficult to access or inefficient to search directly. Oregon 
law requires title insurers and title insurance producers, who are the 
sole users of title information services, to own an interest in a title 
plant in each county in which they issue policies. This law means that 
there are no alternatives to title plants in Oregon counties.

IV. The Complaint

    The Commission's Complaint alleges that the acquisition agreement 
between Fidelity and LPS constitutes a violation of Section 5 of the 
Federal Trade Commission Act, as amended, 15 U.S.C. 45. The Complaint 
further alleges that consummation of the agreement may substantially 
lessen competition in the provision of title information services in 
seven relevant markets in Oregon, in violation of Section 7 of the 
Clayton Act, as amended, 15 U.S.C. 18, and Section 5 of the Federal 
Trade Commission Act.
    The Complaint alleges that a relevant product market in which to 
analyze the effects of the Acquisition is the provision of title 
information services. ``Title information services'' means the 
provision of selected information, or access to information, contained 
in a title plant to a customer or user.
    The Complaint alleges that the relevant geographic markets are 
local in

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nature. Title information is generated, collected, and used on a county 
(or county-equivalent) level. Therefore, geographic markets for title 
information services are highly localized and consist of each of the 
counties or other local jurisdictions covered by the title plants at 
issue. The geographic areas of concern outlined in the Complaint are 
Clatsop, Columbia, Coos, Josephine, Polk, and Tillamook counties, 
Oregon; and the tri-county Portland, Oregon, metropolitan area, 
consisting of Clackamas, Multnomah, and Washington counties.
    The Complaint alleges, absent the proposed relief, that the 
Acquisition would increase the risk of coordinated anticompetitive 
effects in the relevant markets. In Clatsop, Columbia, Coos, and 
Tillamook counties, the Acquisition would reduce the number of 
independent title plant owners to two. In Josephine and Polk counties, 
the Acquisition would leave only three independent title plant owners. 
In each of these six counties, each title plant has a single owner that 
is also the title plant's sole user. In contrast, one jointly-owned 
title plant serves the Portland, Oregon, metropolitan area; each co-
owner has full access to this title plant. The Acquisition would leave 
five joint owners of that joint title plant, but would reduce the 
number of owners necessary to expel other owners from the joint title 
plant.
    The Complaint alleges that entry would not be timely, likely, or 
sufficient to deter or counteract the anticompetitive effects of the 
Acquisition. De novo entry would be costly and time-consuming, 
requiring any potential entrant to assemble a complete and accurate 
index of historical property records.

V. The Proposed Consent Agreement

    The proposed Consent Agreement will remedy the Commission's 
competitive concerns resulting from the Acquisition in each of the 
relevant markets discussed above. Pursuant to the proposed Consent 
Agreement, Respondents must divest a copy of LPS's title plants serving 
Clatsop, Columbia, Coos, Josephine, Polk, and Tillamook counties, 
Oregon, to a Commission-approved acquirer. Respondents must complete 
these divestitures within five (5) months of the closing date of the 
Acquisition. The required divestitures will eliminate the competitive 
harm that otherwise would have resulted in these counties by restoring 
the number of independent title plant owners within each county to the 
pre-acquisition level.
    The proposed Consent Agreement also requires Respondents to divest 
an ownership interest equivalent to LPS's share in the joint title 
plant that serves the Portland, Oregon, metropolitan area to a 
Commission-approved buyer. Respondents must complete this divestiture 
within five (5) months of the closing date of the Acquisition. The 
proposed Consent Agreement requires that the divestiture purchaser's 
interest in the joint title plant, when combined with Fidelity's post-
merger interest, must not equal or exceed 70 percent. The divestiture 
will ensure that no two joint owners of the plant could coordinate to 
expel other members of the joint title plant in this relevant market. 
The proposed Consent Agreement further prohibits Fidelity from 
exercising its voting rights, or influencing others to exercise their 
voting rights, to expel the divestiture buyer from the joint title 
plant for failure to conduct an active title business for a period of 
three (3) months.
    In addition to the required divestitures, the proposed Consent 
Agreement obligates Respondents to provide the Commission with prior 
written notice of title plant acquisitions in any county in Oregon in 
three sets of circumstances: (1) If the acquisition would result in 
three or fewer title plants covering the county; (2) if the acquisition 
would result in three or fewer owners of a joint plant; and (3) if the 
acquisition would result in Fidelity controlling a 50 percent or 
greater share in a joint plant. Each of these circumstances would raise 
competitive concerns in the market for title information services, and 
could reduce competition in the market for title insurance underwriting 
in Oregon. These transactions likely would not come to the Commission's 
attention without the prior notification provision.

VI. The Order To Maintain Assets

    The Decision and Order and the Order to Maintain Assets obligate 
Fidelity to continue to update and maintain the individual title 
plants, the Portland Tri-County Plant interest, and the Portland Tri-
County Plant until the required divestitures are complete. This will 
ensure that the divested assets remain viable sources of title 
information to support the title insurance underwriting operations of 
the acquirer or acquirers. The Order to Maintain Assets explicitly 
requires Fidelity not to compromise these assets' ability and 
suitability to meet Oregon's requirements for title insurers and title 
insurance producers.

VII. Opportunity for Public Comment

    The Consent Agreement has been placed on the public record for 
thirty (30) days for receipt of comments by interested persons. 
Comments received during this period will become part of the public 
record. After thirty (30) days, the Commission will again review the 
Consent Agreement and the comments received and will decide whether it 
should withdraw from the Consent Agreement, modify it, or make it 
final.
    By accepting the proposed Consent Agreement subject to final 
approval, the Commission anticipates that the competitive problems 
alleged in the Complaint will be resolved. The purpose of this analysis 
is to invite and inform public comment on the Consent Agreement, 
including the proposed divestitures. This analysis is not intended to 
constitute an official interpretation of the Consent Agreement, nor is 
it intended to modify the terms of the Consent Agreement in any way.

Statement of the Federal Trade Commission

    Today the Commission is taking remedial action with respect to the 
proposed acquisition of Lender Processing Services, Inc. by Fidelity 
National Financial, Inc. We believe Fidelity's acquisition of LPS, 
which would combine the two firms' title plants, among other assets, is 
likely to reduce competition that benefits title insurance consumers in 
nine counties in the state of Oregon. Our proposed remedy is tailored 
to counteract the likely anticompetitive effects of the proposed 
acquisition without eliminating any efficiencies that might arise from 
the combination of the two companies.
    Fidelity is a leading provider of mortgage and other services to 
the mortgage industry and is the largest title insurance underwriter in 
the United States. LPS's underwriting activity is small by comparison, 
a complementary operation to LPS's key business as a leading provider 
of technology solutions, transaction services, and data and analytics 
to the mortgage and real estate industries.
    Our competitive concerns arise from a limited aspect of the $2.9 
billion combination of Fidelity and LPS: the title plant assets each 
company uses to support its title insurance underwriting activities in 
certain Oregon counties. Both Fidelity and LPS own title plants 
covering Oregon's Clatsop, Columbia, Coos, Josephine, Polk, and 
Tillamook counties. Both firms are also joint

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owners of a title plant covering the tri-county Portland metropolitan 
area.
    Title insurance underwriters require access to county-level title 
information contained in title plant databases. In Oregon, state law 
requires title insurance underwriters or their agents to own a title 
plant in each county in which they issue policies. As a result, any 
firm offering title insurance underwriting in Oregon must obtain an 
ownership interest in an existing title plant or build one from 
scratch. Fidelity and LPS compete for title insurance customers in the 
nine Oregon counties of concern. The proposed acquisition will 
eliminate one of only a few underwriters available in each relevant 
market,\1\ and the Commission has reason to believe that no timely 
entrant is likely to replace the competition lost in these counties.
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    \1\ In Clatsop, Coos, Columbia, and Tillamook counties, only two 
title insurance underwriters will remain post-acquisition. In 
Josephine and Polk counties, three underwriters will remain. In the 
Portland tri-county area, the proposed acquisition will leave five 
competing title insurance underwriters as joint owners of the only 
title plant serving the Portland area. However, the transaction 
would reduce to two the number of joint owners with the ability to 
exclude all others from the plant.
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    Although price competition in title insurance underwriting occurs 
at the state level, underwriters compete on the basis of service as 
well. For example, underwriters compete on the turnaround time from 
title order to settlement, enabling consumers to close on mortgage 
transactions more quickly. Moreover, the costs of entering the title 
insurance underwriting business are higher in Oregon because of the 
requirement that underwriters operating in the state own an interest in 
a title plant rather than merely purchase title information from a 
third-party provider. No other states where both Fidelity and LPS 
compete have a similar requirement. For these reasons, we have reason 
to believe that the proposed acquisition is likely to result in a loss 
of competition and harm title insurance customers.\2\
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    \2\ We note that, in deciding whether to issue a complaint, the 
relevant standard for the Commission is whether we have ``reason to 
believe'' a merger violates Section 7 of the Clayton Act, not 
whether a violation has in fact been established. 15 U.S.C. 45(b).
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    We respectfully disagree with Commissioner Wright that our action 
is based solely on the fact that the merger will decrease the number of 
underwriters operating in the relevant markets and that it is 
inconsistent with the 2010 Horizontal Merger Guidelines. Substantial 
increases in concentration caused by a merger play an important role in 
our analysis under the Guidelines because highly concentrated markets 
with two or three large firms are conducive to anticompetitive 
outcomes. The lens we apply to the evidence in a merger that reduces 
the number of firms in a market to two or three is, and should be, 
different than the lens we apply to a merger that reduces the number of 
firms to six or seven. In the former case, as in the merger here, a 
presumption of competitive harm is justified, under both the express 
language of the Guidelines and well-established case law.\3\
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    \3\ 2010 Horizontal Merger Guidelines Sec.  2.1.3 (``Mergers 
that cause a significant increase in concentration and result in 
highly concentrated markets are presumed to be likely to enhance 
market power, but this presumption can be rebutted by persuasive 
evidence showing that the merger is unlikely to enhance market 
power.''); see also Chicago Bridge & Iron Co. v. FTC, 534 F.3d 410, 
423 (5th Cir. 2008) (``Typically, the Government establishes a prima 
facie case by showing that the transaction in question will 
significantly increase market concentration, thereby creating a 
presumption that the transaction is likely to substantially lessen 
competition.''); FTC v. H.J. Heinz Co., 246 F.3d 708, 716 (D.C. Cir. 
2001) (merger to duopoly creates a rebuttable presumption of 
anticompetitive harm through direct or tacit coordination).
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    However, we did not end our analysis there. We also considered 
whether other market factors, such as the possibility of entry, might 
alleviate our competitive concerns. In most of the markets we 
considered, even where the merger would reduce the number of title 
plant operators from three to two, we concluded that the transaction 
was unlikely to lessen competition because the evidence demonstrated 
that alternative sources of title information beyond proprietary title 
plants existed. That is not the case in Oregon. We are also not 
persuaded that price regulation in Oregon is sufficient to address our 
concerns about potential competitive harm. The evidence showed that 
competition between underwriters occurs on nonprice dimensions, 
supporting our view that the transaction was likely to harm competition 
in the identified nine counties.
    Consistent with the approach the Commission has taken in previous 
merger enforcement actions involving title plants,\4\ the proposed 
consent order addresses these competitive concerns by requiring 
divestiture of a copy of LPS's title plants in each of the affected 
counties and an ownership interest equivalent to that of LPS in the 
tri-county Portland-area joint plant. With the divested assets, the 
acquirer or acquirers will have the title plant ownership interest 
necessary to overcome the most significant legal impediment to compete 
in underwriting, thereby preserving the competition that would be lost 
as a result of the acquisition. There is no evidence that the proposed 
consent order would eliminate any efficiencies resulting from the 
transaction or otherwise burden the parties.
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    \4\ See, e.g., Complaint, Fidelity Nat'l Fin., Inc., FTC Dkt. 
No. C-4300 (Sept. 16, 2010), available at https://www.ftc.gov/sites/default/files/documents/cases/2010/09/100916fidelitycmpt.pdf; 
Complaint, Fidelity Nat'l Fin., Inc., FTC Dkt. No. C-3929 (Feb. 25, 
2000), available at https://www.ftc.gov/sites/default/files/documents/cases/2000/02/fidelitycmp.pdf; Complaint, Commonwealth 
Land Title Ins. Co., FTC Dkt. No. C-3835 (Nov. 12, 1998), available 
at https://www.ftc.gov/sites/default/files/documents/cases/1998/11/ftc.gov-9810127cmp.htm; Complaint, LandAmerica Fin. Grp., Inc., FTC 
Dkt. No. C-3808 (May 27, 1998), available at https://www.ftc.gov/sites/default/files/documents/cases/1998/05/ftc.gov-9710115.cmp_.htm.
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    Merger analysis is necessarily predictive and requires us to make a 
determination as to the likely effects of a transaction. Where, as 
here, we have reason to believe that consumers are likely to suffer a 
loss of competition, and there are no countervailing efficiencies 
weighing against the remedy, we believe the public interest is best 
served by remedying the competitive concerns.

    By direction of the Commission, Commissioner Wright dissenting.

April Tabor,

Acting Secretary.

Dissenting Statement of Commissioner Joshua D. Wright

    The Commission has voted to issue a Complaint and Decision & 
Order against Fidelity National Financial, Inc. (``FNF'') to remedy 
the allegedly anticompetitive effects of FNF's proposed acquisition 
of Lender Processing Services, Inc. (``LPS''). I dissented from the 
Commission's decision because the evidence is insufficient to 
provide reason to believe FNF's acquisition will substantially 
lessen competition for title information services in the Oregon 
counties identified in the Complaint in violation of Section 7 of 
the Clayton Act. I commend staff for their hard work in this matter. 
Staff has worked diligently to collect and analyze a substantial 
quantity of evidence related to numerous product and geographic 
markets within the U.S. mortgage lending industry. Based upon this 
evidence, I concluded there is no reason to believe the proposed 
transaction is likely to lessen competition in the Oregon counties 
identified in the Complaint. It follows, in my view, that the 
Commission should close the investigation and allow the parties to 
complete the merger without imposing a remedy.

I. Mortgage Lending Industry Background

    Title insurance protects against the risk that a sale of real 
property fails to result in the transfer of clear title. Before a 
title insurance policy can issue, a title insurance underwriter must 
evaluate the risk that a subsequent title challenge will be made 
against the property. Title plants are privately owned repositories 
of real estate

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records that help underwriters examine property-specific title 
information in order to establish chain of title and identify any 
potential obstacles--such as liens or encumbrances--that could 
impair the transfer of title. In recent years, third-party title 
information services have begun to offer an alternative to title 
plants by providing access to the necessary data and records on a 
transactional or subscription basis. However, in Oregon, state law 
requires all title insurance underwriters to own an interest in a 
title plant in each county in which it issues policies. This law 
therefore effectively precludes a market in third-party provision of 
title information services.\1\
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    \1\ It is important to note at the outset that Oregon's vertical 
integration requirement creates a scenario in which there is no 
relevant market for title information services in Oregon. As a 
result, any competitive concerns arising from increased 
concentration in title plant ownership must be based upon 
anticompetitive effects in the downstream title insurance 
underwriting market in Oregon. The Commission does not allege, and 
there is no evidence to support the conclusion, that the merger will 
result in a substantial lessening of competition in the title 
insurance underwriting market in Oregon.
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II. Coordinated Effects Analysis Under the Horizontal Merger Guidelines

    The Commission's theory of anticompetitive harm in this matter 
is based solely upon a structural analysis. In other words, the 
Commission seeks to satisfy its prima facie burden of production to 
demonstrate the merger will substantially lessen competition based 
exclusively upon a tenuous logical link between the reduction in the 
number of firms that own title plants in each of the Oregon counties 
identified in the Complaint and a presumption that the merger 
between FNF and LPS will increase the likelihood of collusion or 
coordinated interaction among the remaining competitors for the sale 
of title information services.\2\
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    \2\ The Complaint appears to allege that the proposed 
transaction also may result in unilateral effects by stating the 
proposed merger will substantially lessen competition ``by 
eliminating actual, direct, and substantial competition between 
Respondents Fidelity and LPS in the relevant markets.'' Complaint ] 
16(a), Fidelity National Financial, Inc., FTC File No. 131-0159 
(Dec. 23, 2013). I have seen no evidence to support a unilateral 
effects theory of harm in either the title insurance services or 
title insurance underwriting markets. Nor does the Commission's 
Analysis to Aid Public Comment discuss the potential for a 
unilateral effects theory in this matter. See Analysis of the 
Agreement Containing Consent Order to Aid Public Comment Sec.  4, 
Fidelity National Financial, Inc., FTC File No. 131-0159 (Dec. 23, 
2013). Moreover, the merger cannot possibly result in unilateral 
effects in the title insurance services market because no such 
market exists in Oregon as a result of the state's vertical 
integration requirement.
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    It is of course true that a reduction in the number of firms in 
a relevant market, all else equal, makes it easier for the remaining 
firms to coordinate or collude.\3\ However, this is true of any 
reduction of firms, whether it be from seven to six or three to two, 
and therefore that proposition alone would have us condemn all 
mergers. The pertinent question is whether and when a reduction in 
the number of firms, without more, gives reason to believe an 
acquisition violates the Clayton Act.\4\ The Horizontal Merger 
Guidelines (``Guidelines'') clarify that the focus of modern 
coordinated effects analysis is not merely upon the number of firms 
but rather ``whether a merger is likely to change the manner in 
which market participants interact, inducing substantially more 
coordinated interaction.'' \5\ The key economic issue underlying 
coordinated effects analysis is to understand how the merger changes 
incentives to coordinate, or, as the Guidelines explain, to examine 
``how a merger might significantly weaken competitive incentives 
through an increase in the strength, extent, or likelihood of 
coordinated conduct.'' \6\ Consistent with the focus on changes in 
post-merger incentives to coordinate rather than mere structural 
analysis, the Guidelines declare the federal antitrust agencies are 
not likely to challenge a merger based upon a coordinated effects 
theory of harm unless the following three conditions are satisfied: 
(1) ``the merger would increase concentration and lead to a 
moderately or highly concentrated market''; (2) ``the market shows 
signs of vulnerability to coordinated conduct''; and (3) ``the 
Agencies have a credible basis on which to conclude that the merger 
may enhance that vulnerability.'' \7\
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    \3\ See generally George J. Stigler, A Theory of Oligopoly, 72 
J. Pol. Econ. 44 (1964).
    \4\ One reason to disfavor an approach that assesses the 
likelihood of anticompetitive effects based solely upon the number 
of firms in a market is that the approach is sensitive to the market 
definition exercise and requires great faith that we have defined 
the relevant market correctly.
    \5\ U.S. Dep't of Justice & Fed. Trade Comm'n, Horizontal Merger 
Guidelines Sec.  7.1 (2010) [hereinafter 2010 Guidelines], available 
at https://www.justice.gov/atr/public/guidelines/hmg-2010.pdf.
    \6\ Id.
    \7\ Id.
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    Although market structure is relevant to assessing the first and 
second conditions, the Guidelines require more than the observation 
that the merger has decreased the number of firms to satisfy the 
third condition. This is the correct approach. And it is no less 
correct for mergers that reduce the number of firms from three to 
two. Of what relevance is market structure if the Commission does 
not allege or otherwise describe the relevance of the reduction in 
the number of firms to post-merger incentives to coordinate? There 
is no basis in modern economics to conclude with any modicum of 
reliability that increased concentration--without more--will 
increase post-merger incentives to coordinate.\8\ Thus, the 
Guidelines require the federal antitrust agencies to develop 
additional evidence that supports the theory of coordination and, in 
particular, an inference that the merger increases incentives to 
coordinate.
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    \8\ The Commission touts legal authority rooted in a long ago 
established legal presumption that disfavors mergers that create 
concentrated markets. Statement of the Commission, Fidelity National 
Financial, Inc., FTC File No. 131-0159, n. 2. (Dec. 23, 2013) 
(citing to authority); see also United States v. Philadelphia Nat'l 
Bank, 374 U.S. 321 (1963) (creating the so-called ``structural 
presumption'' that shifts the burden of proof away from the federal 
antitrust agencies and towards defendants in cases where the 
government challenges certain mergers resulting in concentrated 
markets). Significantly, however, modern economic learning and 
evidence no longer supports the foundations for the structural 
presumption upon which the Commission relies today. See Joshua D. 
Wright, Comm'r, Fed. Trade Comm'n, The FTC's Role in Shaping 
Antitrust Doctrine: Recent Successes and Future Targets, Remarks at 
the 2013 Georgetown Global Antitrust Symposium Dinner (Sept. 24, 
2013), available at https://www.ftc.gov/sites/default/files/documents/public_statements/ftc%E2%80%99s-role-shaping-antitrust-doctrine-recent-successes-and-future-targets/130924globalantitrustsymposium.pdf. And although Philadelphia 
National Bank remains good law in that it has not been overruled by 
the Supreme Court, it should not be the basis for the Commission's 
decision if the economic foundations upon which the legal 
proposition was built no longer hold. The Commission has correctly 
taken a similar approach with other disavowed but not yet overturned 
precedent, such as, for instance, United States v. Von's Grocery 
Co., 385 U.S. 270 (1966).
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    For example, the Guidelines observe that ``an acquisition 
eliminating a maverick firm . . . in a market vulnerable to 
coordinated conduct is likely to cause adverse coordinated 
effects.'' \9\ In short, the Guidelines correctly, and consistent 
with the modern economics of collusion, require the Commission to do 
more than point to a reduction in the number of firms to generate 
inferences of likely competitive harm. Although the acquisition of a 
maverick is not necessary for a coordinated effects theory, a theory 
consistent with the Guidelines must include a specific economic 
rationale explaining why--above the mere reduction in the number of 
firms attendant to all mergers--the acquisition of this rival is 
likely to eliminate or reduce a constraint upon successful 
coordination and thus lead to increased incentives to coordinate, or 
alternatively, some evidence supporting structural inferences in the 
context of the specific transaction.
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    \9\ See 2010 Guidelines, supra note 5, Sec.  7.1. The Guidelines 
define a maverick as a firm ``that plays a disruptive role in the 
market to the benefit of customers,'' and provide a number of 
examples. See id. Sec.  2.1.5. Each example has in common the 
acquisition of a firm that imposes a particularized constraint upon 
successful coordination before the merger. See Jonathan B. Baker, 
Mavericks, Mergers and Exclusion: Proving Coordinated Competitive 
Effects Under the Antitrust Laws, 77 N.Y.U.L. Rev. 135 (2002); 
Taylor M. Owings, Identifying a Maverick: When Antitrust Law Should 
Protect a Low-Cost Competitor, 66 Vand. L. Rev. 323 (2013).
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III. Insufficient Evidence To Conclude an Increased Likelihood of 
Coordination Exists Post-Merger

    In my view, the Commission's coordinated effects theory and the 
evidence to support it do not provide a credible basis for 
concluding the merger between FNF and LPS will enhance incentives to 
coordinate. There is no evidence beyond the mere increase in the 
concentration of title plants in the Oregon counties identified in 
the Complaint that provides a reason to believe that the merger will 
increase the likelihood or coordination or collusion for title 
insurance underwriting and thereby substantially reduce competition 
for the same.
    Significantly, because insurance rates are generally set at the 
state level and also

[[Page 139]]

because Oregon is a ``prior approval'' state in which underwriters 
must request specific rates that the regulator then approves or 
amends, it is unlikely that concentration in title plant ownership 
at the county level can increase the likelihood of collusion or 
coordinated interaction and thereby result in an increase in 
price.\10\ There also is no evidence that FNF's acquisition of LPS 
will eliminate a maverick that is currently a constraint upon 
successful coordination. Furthermore, there is no evidence that 
title insurance underwriters can effectively coordinate on non-price 
factors, such as service and turnaround time. Lastly, there is no 
empirical evidence demonstrating that similar levels and changes in 
concentration in other title information service markets have 
resulted in a reduction in price or non-price competition.
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    \10\ Notably absent from the Commission's statement is any 
explanation of how the proposed transaction will increase the 
parties' incentives to coordinate on non-price terms post-merger. 
Such analysis is fundamental to modern merger analysis under the 
Guidelines. See 2010 Guidelines, supra note 5, Sec.  7.1 (``The 
Agencies examine whether a merger is likely to change the manner in 
which market participants interact, inducing substantially more 
coordinated interaction.'').
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    Section 7 of the Clayton Act requires that the Commission first 
find that a merger likely will substantially lessen competition 
prior to agreeing to enter into a consent agreement with merging 
parties. Because there is insufficient evidence to conclude that the 
proposed transaction will substantially lessen competition, I 
respectfully dissent and believe the Commission should close the 
investigation and allow the parties to complete the merger without 
imposing a remedy.
[FR Doc. 2013-31331 Filed 12-31-13; 8:45 am]
BILLING CODE 6750-01-P