Is There A Maverick In The House? The FTC’s Resolution Of The Fidelity National Financial – Lender Processing Services Deal Suggests Commissioner Wright Is One

Under the antitrust merger guidelines, a maverick is a firm "that plays a disruptive role in the market to the benefit of customers." In Washington political circles, a maverick often refers to a politician that does not hew faithfully to the party line. On the surface, the Federal Trade Commission's ("FTC") 3-1 initial approval of a consent decree, announced right before Christmas, resolving its review of Fidelity National Financial Inc.'s ("Fidelity") $2.9 billion deal to acquire Lender Processing Services Inc. ("LPS"), looks pretty straightforward. The proposed consent decree would require Fidelity to divest certain title insurance assets in nine Oregon counties to avoid 3-2 and 4-3 reductions in the number of competitors, where there would be no timely entry to replace the lost competition. Yet FTC Commissioner Wright dissented from the issuance of the complaint and consent decree, suggesting that the FTC's action was "based solely" upon this structural analysis, which he found insufficient.

Fidelity is the largest title insurance provider in the United States and a major mortgage services company. 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. The FTC's competitive concerns arise from the title plant activities each company uses to support its title insurance underwriting activities in certain Oregon counties. 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. In the Oregon counties focused upon by the FTC, the transaction would eliminate one of only a few underwriters available in the relevant market, sometimes reducing the number of competitors from three to two.

Antitrust practitioners have long counselled that transactions that reduce the number of competitors from three to two are provocative, if not problematic. Those who have contested the concentration presumption in such cases by arguing specific market facts have normally failed — for example, the FTC's successful challenge of the baby food merger over a decade ago. See, e.g. FTC v. H.J. Heinz Co., 246 F3d 708 (D.C. Cir. 2001).

However, Commissioner Wright argues in his dissent that the...