FTC Challenges Reed Elsevier's Proposed $4.1 Billion Acquisition of ChoicePoint, Inc.

To Preserve Competition, Order Requires Divestiture of Assets Related to ChoicePoints AutoTrackXP and CLEAR Electronic Public Records Services

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The Federal Trade Commission today issued a complaint charging that Reed Elsevier Inc.’s (Reed Elsevier) proposed $4.1 billion acquisition of ChoicePoint Inc. (ChoicePoint) would be anticompetitive and in violation of the antitrust laws, as it would combine the two largest providers of electronic public record services to U.S. law enforcement customers.

To eliminate the anticompetitive effects of the proposed acquisition, the FTC will require Reed Elsevier to divest assets related to ChoicePoint’s AutoTrackXP and Consolidated Lead Evaluation and Reporting (CLEAR) electronic public records services to Thomson Reuters Legal Inc., within 15 days after the proposed acquisition is consummated.

Through its LexisNexis division, Reed Elsevier provides electronic public records services to law enforcement customers in direct competition with ChoicePoint’s AutoTrackXP and recently, ChoicePoint’s CLEAR, a new and advanced electronic public records service. Together, the two firms account for over 80 percent of the approximately $60 million U.S. market for the sale of electronic public records services to law enforcement customers.

“The proposed acquisition would have eliminated the intense head-to-head competition between LexisNexis and ChoicePoint that has lowered prices and led to product innovations for a critical law enforcement tool,” said David P. Wales, Acting Director of the FTC’s Bureau of Competition. “The action announced today ensures that law enforcement customers will continue to benefit from this competition as they attempt to keep pace with increasingly sophisticated criminal activity.”

Electronic Public Records Services

Electronic public records services, such as those offered by LexisNexis and ChoicePoint, compile public and non-public records about individuals and businesses, including credit header data, criminal records, motor vehicle records, property records, and employment records. Law enforcement customers use electronic public records services as an investigative tool in complex criminal investigations, such as combating terrorism, locating fugitives, and detecting illegal drug transactions. When selecting a provider of electronic public record services, law enforcement customers rely on companies with a proven track record of providing accurate and up-to-date public records data with sophisticated search analytics.

The Commission’s Complaint

According to the FTC’s complaint, Reed Elsevier’s proposed acquisition of ChoicePoint would be anticompetitive and in violation of Section 5 of the FTC Act and Section 7 of the Clayton Act, as amended. The FTC states that the relevant product market in which to assess the likely anticompetitive effects of the proposed acquisition is electronic public records services to law enforcement customers. According to the FTC, the U.S. market for electronic public records services to law enforcement customers is highly concentrated, and the proposed acquisition would eliminate substantial competition between the only two significant providers of electronic public records services to U.S. law enforcement customers.

In addition, according to the FTC, the intense rivalry between LexisNexis and ChoicePoint has provided law enforcement customers with lower prices, improved products, and better service and support. This dramatic competition led ChoicePoint to introduce CLEAR – a new and advanced electronic public records service – designed specifically for law enforcement customers. Absent the consent order, the Commission contends, LexisNexis would be able unilaterally to raise the prices of electronic public records services to law enforcement customers and reduce incentives to innovate and develop new services.

Finally, the complaint states that new entry into the market for the sale of electronic public records services to law enforcement customers sufficient to deter or counteract the alleged anticompetitive impact of the proposed acquisition is unlikely to occur within two years.

Terms of the Consent Order

The Commission’s consent order settling the complaint is designed to remedy the anticompetitive effects of Reed Elsevier’s acquisition of ChoicePoint in the market for electronic public records services to law enforcement customers. The order requires the divestiture of assets related to ChoicePoint’s AutoTrackXP and CLEAR to Thomson Reuters Legal Inc. (West) within 15 days of the date the deal is consummated.

The FTC believes West is a well-qualified acquirer of the assets to be divested, in that it has the resources, capabilities, experience, and reputation to ensure it will be an effective competitor in the U.S. market for electronic public records services to law enforcement customers. Headquartered in Eagan, Minnesota, West is a subsidiary of Thompson Reuters, which is one of the world’s leading information service providers to the legal and business community. West already has a large and experienced sales force with existing relationships with many law enforcement agencies. With the divested assets, West will be well-situated to compete with Reed Elsevier’s LexisNexis.

The consent order contains several provisions designed to ensure that the divestiture to West is successful. First, it requires Reed Elsevier to provide transitional services to West for up to two years to enable West to compete effectively immediately after the divestiture. Second, the order requires that Reed Elsevier maintain the viability and marketability of the AutoTrackXP and CLEAR assets prior to their divestiture to West. Finally, the order allows the FTC to appoint an interim monitor to ensure that Reed Elsevier meets its divestiture obligations, and requires the company to file periodic reports with the Commission until the assets are successfully divested.

The Commission vote to approve the complaint and consent order and place copies on the public record was 4-0. The order will be subject to public comment for 30 days, until October 15, 2008, after which the Commission will decide whether to make it final. Comments should be sent to: FTC, Office of the Secretary, 600 Pennsylvania Ave., N.W., Washington, DC 20580.

The attorneys general’s offices in Arizona, Arkansas, Colorado, Delaware, Florida, Hawaii, Illinois, Kansas, Kentucky, Maryland, Massachusetts, Michigan, Missouri, Ohio, Pennsylvania, Texas, Washington, and Wisconsin assisted the FTC in its investigation of this matter.

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 documents related to this matter are available from the FTC's Web site at http://www.ftc.gov and the FTC's Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580. The FTC’s Bureau of Competition works with the Bureau of Economics to investigate alleged anticompetitive business practices and, when appropriate, recommends that the Commission take law enforcement action. To inform the Bureau about particular business practices, call 202-326-3300, send an e-mail to antitrust@ftc.gov, or write to the Office of Policy and Coordination, Room 394, Bureau of Competition, Federal Trade Commission, 600 Pennsylvania Ave, N.W., Washington, DC 20580. To learn more about the Bureau of Competition, read “Competition Counts” at http://www.ftc.gov/competitioncounts.

(FTC File No. 081-0133)

Contact Information

Mitchell J. Katz,
Office of Public Affairs
Brendan J. McNamara,
Bureau of Competition