The Federal Trade Commission has negotiated an agreement containing a proposed consent order designed to remedy the anticompetitive effects arising from Fidelity National Financial, Inc.'s ("FNF") acquisition of the common stock of Chicago Title Corporation ("CT"). The FTC has alleged that the proposed acquisition would reduce competition in six local markets for title information services, and under the terms of the agreement, FNF would be required to divest or sell copies of certain title plants in six California counties.
"Title information services are used in underwriting title insurance and for other purposes in the real estate industry. The divestitures that would be required in this case will ensure that these services are provided at competitive prices, thereby keeping down the price of title insurance to consumers," said Richard G. Parker, Director of the FTC's Bureau of Competition. Title plants are privately-owned collections of real estate title information obtained from public records which can be used to conduct title searches or otherwise determine the ownership of real estate and other property. Title plants permit users to research property ownership information more quickly than by consulting the original public records, which may be located in a number of separate public offices -- for example, in offices of the county recorder, tax collector, and state and federal courts. Because of the county-specific way in which title information is generated and collected and the highly local character of the real estate markets in which the title information services are used, geographic markets for title information services are highly localized, consisting of the county or other local jurisdiction embraced by the real property information contained in the title plant.
FNF is a Delaware corporation with its executive offices located in Irvine, California. CT is a Delaware corporation with its principal offices based in Chicago, Illinois. Both companies are engaged, among other things, in the sale of title insurance and the provision of title information services.
According to the FTC's complaint, on August 1, 1999, FNF entered into an agreement to acquire the common stock of CT for approximately $1.2 billion. The complaint alleges that the effects of the acquisition may substantially lessen competition by eliminating direct competition between FNF and CT in title information services and increasing the likelihood of collusion or coordinated interaction among competing providers of title information services in the following counties, all of which are located in California: San Luis Obispo, Tehama, Napa, Merced, Yolo, and San Benito.
Further, in each of the local jurisdictions named in the complaint, the market for title information services is highly concentrated, and FNF and CT are direct competitors in the sale or provision of title information services. In addition, according to the complaint, in each of the local jurisdictions identified, there are no commercially reasonable substitutes for title information services, and due to the relatively large fixed costs associated with building and maintaining title plants, entry into the market for title information services in each of the local jurisdictions is difficult or unlikely to occur at a sufficient scale to deter or counteract the effects of the acquisition.
To remedy the alleged anticompetitive effects, the proposed settlement would require FNF to divest or sell copies of the pre-acquisition title plant interests of either FNF or CT in five of the identified local jurisdictions to a buyer or buyers approved by the Commission. The settlement also would require FNF to divest the pre-acquisition interests of FNF or CT in a jointly owned title plant in San Luis Obispo County, California, or, alternatively, to relinquish any additional voting rights in the joint plant that FNF may have accrued post-acquisition while obtaining a new owner of the joint plant. The specified relief would be required to be completed within four months after FNF signs the proposed settlement agreement. Prior to divestiture, FNF would be required to maintain the viability and marketability of the properties, including updating the title plants in the same fashion as before the acquisition and maintaining in effect all user contracts and relationships.
If the specified relief is not accomplished by the respondent within the four-month period. the proposed settlement includes a provision permitting the Commission to appoint a trustee to accomplish the divestitures.
Finally, the proposed agreement contains a number of recordkeeping and reporting requirements designed to monitor compliance with the terms of the settlement.
An announcement regarding the proposed consent agreement will be published in the Federal Register shortly. The agreement will be subject to public comment for 30 days, until February 11, after which the Commission will decide whether to make it final. Comments should be addressed to the FTC, Office of the Secretary, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580.
The Commission vote to place the proposed consent agreement on the public record for comment was 5-0.
NOTE: A consent agreement is for settlement purposes only and does not constitute an admission of a law violation. When the Commission issues a consent order on a final basis, it carries the force of law with respect to future actions. Each violation of such an order may result in a civil penalty of $11,000.
Copies of the complaint, proposed settlement and an analysis of the agreement to aid in public comment are available from the FTC's web site at http://www.ftc.gov and also from the FTC's Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580; 877-FTC-HELP (877-382-4357); TDD for the hearing impaired 1-866-653-4261. To find out the latest news as it is announced, call the FTC NewsPhone recording at 202-326-2710.
(FTC File No. 991 0298)