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FTC files case to block $11.7B ICE-Black Knight merger

Agency says combination of nation’s largest mortgage originators would risk monopoly

International Exchange's Jeffrey Sprecher (Getty, International Exchange, Tiffany & Co./Public domain/Wikimedia Commons)
International Exchange's Jeffrey Sprecher (Getty, International Exchange, Tiffany & Co./Public domain/Wikimedia Commons)

The Federal Trade Commission is seeking a temporary restraining order to block International Exchange Inc.’s (ICE) proposed $11.7 billion acquisition of mortgage software firm Black Knight. 

International Exchange, an Atlanta-based company that operates clearing houses and financial exchanges, is best known as the owner of the New York Stock Exchange.

The deal, which would merge the two largest mortgage loan origination software providers in the country, would lead to higher costs that would be passed on to homebuyers, the agency argued in a heavily redacted complaint, which was filed in a San Francisco court on Monday. 

“The commission is likely to succeed in proving that the effect of the acquisition may substantially lessen competition or tend to create a monopoly … and that the merger agreement and acquisition constitute unfair methods of competition,” the filing read.     

The deal, which was first announced in May of last year, was a cash-and-stock transaction that was originally valued at $13.1 billion. The acquisition has already been approved by the boards of both companies, according to a previous report from the Wall Street Journal.

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To address concerns that the deal would hurt competition, Black Knight has offered to sell Empower, its loan origination software business, to Wisconsin-based Constellation Web Solutions, the court filing read.  

According to the FTC, Black Knight’s offer to divest does not go far enough. The point of contention is Optimal Blue, a product pricing service that would be included in the acquisition. The agency claims that excluding Optimal Blue from the divestment would hamper Constellation’s ability to compete against International Exchange.   

“The proposed remedy fails to transfer a standalone business to Constellation and would require Constellation to rely on its post-acquisition competitor, ICE, to supply many ancillary services to Empower customers via a resale agreement,” the FTC wrote in its petition. 

The agency also warned that “continuing entanglements” would hamper Constellation’s ability to offer the services that Black Knight offers. 

“Lenders and American consumers benefit from the competition between ICE and Black Knight, and they should not be forced to bear the risk of a divestiture that fails to maintain this competition,” the court filing read. 

The FTC’s four commissioners voted to lodge a legal challenge against the merger last March. The agency’s request for an injunction aims to keep the status quo until a series of administrative hearings that start on July 12. 

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