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FTC Challenges ICE’s $13.1 Billion Black Knight Buy

 |  March 9, 2023

The US Federal Trade Commission announced on Thursday that it would be taking measures to curb Intercontinental Exchange’s takeover of Black Knight for $13.1 billion. The FTC has indicated that this deal could drive up costs, and inhibit innovation and involvement of choice when financing a home purchase.

“For many Americans, buying a home is an important investment toward building financial security,” said Patty Brink, Acting Deputy Director of the Bureau of Competition. “This deal would reduce competition in key areas of the mortgage process, ultimately raising costs for lenders and homebuyers. The FTC will intervene when illegal mergers risk harming competition in such critical markets.”
The FTC voted 4-0 to bring an administrative complaint.

Read more: Black Knight To Shed Unit In Bid To Save $13BN Sale To ICE

In May of this year, ICE’s acquisition of Ellie Mae raised some concerns from consumer advocates and community lenders regarding the potential increase in costs. The merger gave ICE more influence in the mortgage data market which banks depend on, prompting an industry group of lenders to express their opposition to it.

Loan origination systems (LOS) are software used to process the documents and procedures necessary to complete a loan. The most popular LOS in the United States is Encompass, owned by ICE. Black Knight’s Empower is the other major market player in the United States. The FTC today filed an antitrust complaint alleging that this transaction would result in higher costs for lenders, which would then be passed on to consumers.

In addition to harm in the LOS market, the deal would also harm competition for product pricing and eligibility engines, or PPEs, and other various ancillary services that are add-ons to loan origination software. PPEs are used by lenders to obtain the best interest rates for the homebuyer. If the deal proceeds, it would eliminate PPE competition between the merging parties and would increase ICE’s ability and incentive to use control of its LOS to undermine competition from harmful rival PPEs and other add-on providers.