Fidelity National Financial Inc. agreed to settle Federal Trade Commission charges that its proposed $2.9 billion acquisition of Lender Processing Services Inc. (LPS) would substantially lessen competition by combining the firms title plant assets in several local markets in Oregon.
To preserve competition, the proposed settlement requires Fidelity to sell a copy of LPSs title plants in six Oregon counties and an ownership interest equivalent to LPS share of a jointly owned title plant in the Portland, Oregon, metropolitan area. These divestitures are designed to counteract the likely anticompetitive effects of the transaction, while preserving any efficiencies that might arise from the combination of Fidelity and LPS.
Title plants are databases used by abstractors, title insurers, title insurance agents, and others to determine the title status of real property. Title plant users access this information to establish the chain of title and make other determinations in order to underwrite and issue title insurance policies.
On May 28, 2013, Fidelity entered into an agreement to acquire LPS for approximately $2.9 billion. Fidelity is a publicly traded company based in Jacksonville, Fla. It provides services to the mortgage industry and is the largest title insurance underwriter in the U.S. LPS also is a publicly traded company based in Jacksonville. It is a provider of technology solutions, transaction services and data and analytics to the mortgage and real estate industries.
According to the FTC's complaint, the proposed combination of Fidelitys and LPSs title plant assets in six individual Oregon counties and the tri-county Portland, Oregon metropolitan area is likely to substantially lessen competition, in violation of U.S. antitrust laws.
Oregon law requires title insurers to own an interest in a title plant in each county in which they issue policies. This requirement creates a barrier to entry for new firms seeking to provide title insurance underwriting. The proposed acquisition would eliminate one of only a few available title plants in six Oregon counties, and make it possible for Fidelity and only one other underwriter to exclude competing firms from having an interest in a joint title plant in the Portland metropolitan area. Without the provisions in the consent order, the FTC alleges that the proposed acquisition is likely to increase the risk of anticompetitive coordination between title plant owners in these local markets.
The proposed order settling the FTCs charges will restore competition that is likely lost through the merger but will not interfere with any efficiencies that may be associated with the combination of the two companies.
In addition, the order requires Fidelity to sell an ownership interest equivalent to LPSs share in the joint title plant that serves the Portland area to an FTC-approved buyer, also within five months of the deals close. It also prohibits Fidelity from exercising its voting rights or influencing others to expel the buyer from the joint plant in the event that the buyer fails to operate an active title business for three months. This provision ensures that the buyer will have the flexibility to develop and carry out its title insurance business.
Finally, the order requires Fidelity to notify the FTC in advance before acquiring any title plants in Oregon in certain circumstances that might raise anticompetitive concerns, and includes an order to maintain assets that requires Fidelity to maintain the title plant assets and the joint plant until the divestitures are complete.