[Federal Register Volume 88, Number 174 (Monday, September 11, 2023)]
[Notices]
[Pages 62371-62374]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-19534]


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FEDERAL TRADE COMMISSION

[File No. 221 0142]


Intercontinental Exchange, Inc. and Black Knight, Inc.; Analysis 
of Agreement Containing Consent Order To Aid Public Comment

AGENCY: Federal Trade Commission.

ACTION: Proposed consent agreement; request for comment.

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SUMMARY: The consent agreement in this matter settles alleged 
violations of federal law prohibiting unfair methods of competition. 
The attached Analysis of Proposed Consent Orders to Aid Public Comment 
describes both the allegations in the complaint and the terms of the 
consent orders--embodied in the consent agreement--that would settle 
these allegations.

DATES: Comments must be received on or before October 11, 2023.

ADDRESSES: Interested parties may file comments online or on paper by 
following the instructions in the Request for Comment part of the 
SUPPLEMENTARY INFORMATION section below. Please write: ``ICE and Black 
Knight; File No. 221 0142'' on your comment and file your comment 
online at https://www.regulations.gov by following the instructions on 
the web-based form. If you prefer to file your

[[Page 62372]]

comment on paper, please mail your comment to the following address: 
Federal Trade Commission, Office of the Secretary, 600 Pennsylvania 
Avenue NW, Suite CC-5610 (Annex R), Washington, DC 20580.

FOR FURTHER INFORMATION CONTACT: Ashley Masters (202-326-2291), Bureau 
of Competition, Federal Trade Commission, 400 7th Street SW, 
Washington, DC 20024.

SUPPLEMENTARY INFORMATION: Pursuant to section 6(f) of the Federal 
Trade Commission Act, 15 U.S.C. 46(f), and FTC Rule Sec.  2.34, 16 CFR 
2.34, notice is hereby given that the above-captioned consent agreement 
containing a consent order to cease and desist, having been filed with 
and accepted, subject to final approval, by the Commission, has been 
placed on the public record for a period of 30 days. The following 
Analysis of Agreement Containing Consent Orders to Aid Public Comment 
describes the terms of the consent agreement and the allegations in the 
complaint. An electronic copy of the full text of the consent agreement 
package can be obtained from the FTC website at this web address: 
https://www.ftc.gov/news-events/commission-actions.
    You can file a comment online or on paper. For the Commission to 
consider your comment, we must receive it on or before October 11, 
2023. Write ``ICE and Black Knight; File No. 221 0142'' on your 
comment. Your comment--including your name and your state--will be 
placed on the public record of this proceeding, including, to the 
extent practicable, on the https://www.regulations.gov website.
    Because of the agency's heightened security screening, postal mail 
addressed to the Commission will be delayed. We strongly encourage you 
to submit your comments online through the https://www.regulations.gov 
website. If you prefer to file your comment on paper, write ``ICE and 
Black Knight; File No. 221 0142'' on your comment and on the envelope, 
and mail your comment to the following address: Federal Trade 
Commission, Office of the Secretary, 600 Pennsylvania Avenue NW, Suite 
CC-5610 (Annex R), Washington, DC 20580.
    Because your comment will be placed on the publicly accessible 
website at https://www.regulations.gov, you are solely responsible for 
making sure your comment does not include any sensitive or confidential 
information. In particular, your comment should not include sensitive 
personal information, such as your or anyone else's Social Security 
number; date of birth; driver's license number or other state 
identification number, or foreign country equivalent; passport number; 
financial account number; or credit or debit card number. You are also 
solely responsible for making sure your comment does not include 
sensitive health information, such as medical records or other 
individually identifiable health information. In addition, your comment 
should not include any ``trade secret or any commercial or financial 
information which . . . is privileged or confidential''--as provided by 
section 6(f) of the FTC Act, 15 U.S.C. 46(f), and FTC Rule Sec.  
4.10(a)(2), 16 CFR 4.10(a)(2)--including competitively sensitive 
information such as costs, sales statistics, inventories, formulas, 
patterns, devices, manufacturing processes, or customer names.
    Comments containing material for which confidential treatment is 
requested must be filed in paper form, must be clearly labeled 
``Confidential,'' and must comply with FTC Rule Sec.  4.9(c). In 
particular, the written request for confidential treatment that 
accompanies the comment must include the factual and legal basis for 
the request and must identify the specific portions of the comment to 
be withheld from the public record. See FTC Rule Sec.  4.9(c). Your 
comment will be kept confidential only if the General Counsel grants 
your request in accordance with the law and the public interest. Once 
your comment has been posted on https://www.regulations.gov--as legally 
required by FTC Rule Sec.  4.9(b)--we cannot redact or remove your 
comment from that website, unless you submit a confidentiality request 
that meets the requirements for such treatment under FTC Rule Sec.  
4.9(c), and the General Counsel grants that request.
    Visit the FTC website at https://www.ftc.gov to read this document 
and the news release describing this matter. The FTC Act and other laws 
the Commission administers permit the collection of public comments to 
consider and use in this proceeding, as appropriate. The Commission 
will consider all timely and responsive public comments it receives on 
or before October 11, 2023. For information on the Commission's privacy 
policy, including routine uses permitted by the Privacy Act, see 
https://www.ftc.gov/site-information/privacy-policy.

Analysis of Agreement Containing Consent Orders To Aid Public Comment

    The Federal Trade Commission (``Commission'') has accepted for 
public comment, subject to final approval, an Agreement Containing 
Consent Orders (``Consent Agreement'') with Intercontinental Exchange, 
Inc. (``ICE'') and Black Knight, Inc. (``Black Knight'') (collectively, 
``Respondents'').
    On May 4, 2022, ICE and Black Knight entered into an agreement 
whereby ICE would acquire Black Knight for approximately $13.1 billion 
(the ``Proposed Transaction''). The Proposed Transaction raises 
significant competitive concerns relating to the price and quality of 
residential mortgage origination software throughout the United States. 
ICE and Black Knight are the nation's two dominant residential mortgage 
loan origination system (``LOS'') and product, pricing, and eligibility 
engine (``PPE'') providers. Their combination would further consolidate 
already-concentrated LOS and PPE markets and would increase ICE's 
incentive to disadvantage independent PPE providers who rely on 
software integration with ICE's Encompass LOS to serve their own 
customers.
    On March 7, 2023, ICE and Black Knight announced a deal to divest 
Black Knight's Empower LOS and certain associated products and services 
to Constellation Web Solutions Inc. and its affiliates (collectively, 
``Constellation''). Because Respondents' proposed divestiture did not 
address the full range of possible harms arising from the Proposed 
Transaction, the Commission chose to challenge the deal. On March 9, 
2023, the Commission issued an administrative complaint alleging that 
the Proposed Transaction, if consummated, may substantially lessen 
competition in the markets for LOSs, commercial LOSs, PPEs, and PPEs 
for users of ICE's Encompass LOS in violation of Section 7 of the 
Clayton Act, 15 U.S.C. 18, and Section 5 of the Federal Trade 
Commission Act, 15 U.S.C. 45. On April 10, 2023, Commission staff also 
filed suit in the United States District Court for the Northern 
District of California under Section 13(b) of the Federal Trade 
Commission Act, 15 U.S.C. 53(b), seeking to enjoin Respondents from 
merging until the legality of the Proposed Transaction had been 
adjudicated.
    After months of litigation, ICE and Black Knight announced on July 
17, 2023, a deal to divest Black Knight's Optimal Blue business unit, 
also to Constellation, which contains the Optimal Blue PPE product. In 
light of the deals to divest Black Knight's LOS and PPE businesses and 
progress made in negotiations, the Commission and Respondents agreed to 
a dismissal without prejudice of the United States District Court 
action on August 7, 2023.

[[Page 62373]]

    Since the announcement of the Optimal Blue divestiture, the 
Commission and Respondents have negotiated additional terms, now 
memorialized in the Consent Agreement and incorporated in the Decision 
and Order (``D&O''), that better ensure these divestitures will 
position Constellation as an effective competitor. The Consent 
Agreement requires Respondents to complete the divestitures to 
Constellation within 20 days after ICE consummates its acquisition of 
Black Knight. The Consent Agreement contains additional safeguards to 
ensure that Respondents maintain the viability of the divestiture 
assets until the divestitures are complete and provide necessary 
transition services to Constellation.
    The Commission has placed the Consent Agreement on the public 
record for 30 days to solicit comments from interested persons. 
Comments received during this period will become part of the public 
record. After 30 days, the Commission will review the comments received 
and decide whether it should withdraw, modify, or finalize the Consent 
Agreement.

I. The Respondents

    Respondent ICE is a publicly traded corporation incorporated in 
Delaware, with its headquarters in Atlanta, Georgia. ICE provides 
market infrastructure, data services, and technology solutions in three 
segments: exchanges (including the New York Stock Exchange), fixed 
income and data services, and mortgage technology. In 2020, ICE 
acquired Ellie Mae, along with its widely used Encompass LOS. ICE also 
offers a PPE--the Encompass Product and Pricing Service (``EPPS'')--to 
Encompass users.
    Respondent Black Knight is a publicly traded corporation 
incorporated in Delaware, with its headquarters in Jacksonville, 
Florida. Black Knight is a provider of software, data, and analytics 
for the mortgage, real estate, and consumer loan markets. Black 
Knight's mortgage technology products include the Empower LOS, the 
Mortgage Servicing Platform, and the Optimal Blue PPE. Black Knight 
acquired Optimal Blue from the private equity firm GTCR in 2020.

II. The Relevant Markets

    The Proposed Transaction presents substantial antitrust concerns 
relating to two services central to the residential mortgage loan 
origination workflow: LOSs and PPEs. Mortgage lenders of all sizes rely 
on LOS software as the primary tool to manage the residential mortgage 
loan origination process. An LOS serves as the lender's system of 
record for each loan and is used to manage the workflow for the 
origination process and to perform commercial, legal, and compliance 
tasks required during the lending process. As a mortgage moves from 
application to close, it touches on numerous ancillary services 
necessary to process, underwrite, fund, and close a loan. The LOS 
coordinates and automates much of a lender's interaction with these 
ancillary services. Because of the administrative complexity, 
regulatory framework, and risk involved in the mortgage origination 
process, originating mortgage loans without an LOS would be 
prohibitively burdensome and costly for most lenders.
    Most mortgage lenders rely on commercial LOSs provided by 
specialized vendors, such as ICE's Encompass LOS and Black Knight's 
Empower LOS. Though some lenders choose to originate mortgages with in-
house LOSs, the complex programming and compliance tasks involved with 
operating an LOS require significant investment and specialized 
expertise that is beyond the capabilities of all but a few large 
lenders. Even among the few lenders with proprietary systems, the trend 
has been to move toward commercial LOSs. Commercial LOSs therefore 
constitute a relevant product market in which to analyze the effects of 
the Proposed Transaction. A market including commercial and proprietary 
LOSs is an appropriate alternate relevant product market in which to 
evaluate the effects of the Proposed Transaction.
    A PPE is an ancillary service that a mortgage lender uses to 
identify potential loan rates for residential loan products for a 
borrower, determine the borrower's eligibility for a given loan, and 
lock in the loan's terms for the borrower. Software integration between 
a PPE and a lender's chosen LOS enables a lender to take advantage of a 
PPE's full functionality, allowing loan and application data to flow 
automatically between the LOS, PPE, and other ancillary services. 
Lenders thus express a strong preference for PPEs integrated with their 
LOS of choice. Because users of ICE's Encompass LOS are functionally 
limited to choosing among PPEs integrated with Encompass, PPEs for 
Encompass users constitute a relevant product market in which to 
evaluate the effects of the Proposed Transaction. Similarly, a product 
market including all PPEs is an appropriate alternate market through 
which to evaluate the effects of the Proposed Transaction.
    Because LOS and PPE competition takes place on a national scale, 
the relevant geographic market in which to evaluate the Proposed 
Transaction is the United States.

III. Effects of the Proposed Transaction on Competition

    The Proposed Transaction would eliminate direct and substantial 
competition between ICE and Black Knight in each of the relevant 
markets. ICE and Black Knight operate the two largest commercial LOSs 
in the United States. ICE's EPPS also competes directly with Black 
Knight's Optimal Blue PPE for the business of lenders using ICE's 
Encompass LOS. Respondents compete on price to market their LOSs and 
PPEs, and their customers have benefitted. Respondents also compete on 
functionality, which has driven innovation and investment in LOS and 
PPE features. By eliminating this head-to-head competition, the 
Proposed Transaction would enable the combined firm to increase LOS and 
PPE prices and reduce its investment in these products. By giving ICE 
control of the popular Optimal Blue PPE, the Proposed Transaction also 
would increase ICE's incentive to disadvantage rival PPEs who rely on 
software integrations with ICE's Encompass LOS to serve their customers 
by foreclosing or restricting the rivals' access to Encompass or 
degrading the quality of the rivals' integrations with Encompass. 
Finally, the Proposed Transaction would further an existing trend 
toward concentration in LOS and PPE markets.
    Entry into each relevant market would not be timely, likely, or 
sufficient to deter or counteract anticompetitive effects arising from 
the Proposed Transaction. Significant barriers to LOS and PPE entry 
include substantial investment and software development timelines, as 
well as lenders' high switching costs, lengthy switching timelines, and 
reluctance to switch to unproven products.

IV. The Proposed Order

    The D&O would address the Proposed Transaction's anticipated 
anticompetitive effects by requiring Respondents to divest Black 
Knight's Optimal Blue business (including the Optimal Blue PPE), 
Empower LOS, and certain associated ancillary products and assets to 
Constellation. Under the terms of the proposed divestiture, 
Constellation would also receive a license to resell with Empower 
certain other Black Knight mortgage-related products and services which 
would be acquired by ICE. The D&O requires that the divestitures be 
completed no later

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than 20 days after Respondents consummate ICE's acquisition of Black 
Knight. The Order to Maintain Assets requires Respondents to maintain 
the viability of the divestiture assets until the divestitures are 
complete.
    The D&O contains additional provisions designed to ensure the 
effectiveness of this relief. For example, the D&O requires Respondents 
to provide Constellation with transition assistance as it integrates 
the acquired assets to enable Constellation to operate the divested 
businesses similarly to how they were operated by Black Knight. The D&O 
also requires Respondents to obtain all third-party and governmental 
consents necessary to effectuate the divestitures.
    To help Constellation succeed in operating the divested assets, the 
D&O further requires Respondents for one year to facilitate 
Constellation's hiring of certain employees of the Black Knight 
divisions responsible for the Empower LOS and Optimal Blue, to the 
extent they were not already included in the divestitures. The D&O 
similarly prohibits Respondents from soliciting Constellation employees 
who came from Black Knight to work in the divested businesses for two 
years. It also prohibits Respondents from enforcing any noncompete or 
non-solicit provision or agreement against any employee who seeks or 
obtains a position in the divested businesses during the term of the 
D&O.
    The D&O protects the confidential information of the divested Black 
Knight divisions as well as confidential information that Respondents 
may learn from Constellation in the course of providing transition 
services. These safeguards include limiting the purposes for which 
Respondents may use such confidential information and the employees to 
whom the information may be disclosed. The D&O facilitates the 
execution of NDAs by Black Knight employees who possess confidential 
information and who will remain with Respondents post-divestiture, and 
it prevents Respondents from allowing any such employees who decline to 
sign an NDA from working on an ICE LOS or PPE.
    Black Knight and Constellation have agreed that Black Knight will 
finance a portion of Constellation's purchase price of Optimal Blue via 
a promissory note. In order to ensure that Respondents do not have a 
continuing entanglement with Constellation based on the promissory 
note, the D&O provides that the Commission will appoint a seller note 
trustee no later than one day after the divestiture closes. Not later 
than ten days after the Commission appoints the trustee, Respondents 
must transfer their rights, title, and interest in the promissory note 
to the trustee. The trustee will sell the note to a third party within 
six months of the divestiture.
    The D&O requires Respondents to obtain prior approval from the 
Commission before reacquiring any divested assets or acquiring an 
interest in any business that owns or sells an LOS for ten years. The 
D&O also requires Respondents to provide the Commission with prior 
notice before acquiring an interest in any business that owns or sells 
a PPE for ten years. The D&O requires Constellation to obtain prior 
approval from the Commission before selling any of the divested assets 
for three years after the divestitures and for another seven years if 
the acquiring firm operates an LOS or PPE. Finally, the D&O provides 
for the appointment of an independent monitor to oversee compliance 
with the D&O's requirements.
    The purpose of this analysis is to facilitate public comment on the 
Consent Agreement, and the Commission does not intend this analysis to 
constitute an official interpretation of the Consent Agreement or the 
D&O or modify their terms in any way.

    By direction of the Commission.
April J. Tabor,
Secretary.
[FR Doc. 2023-19534 Filed 9-8-23; 8:45 am]
BILLING CODE 6750-01-P