FTC Files to Prevent International Exchange-Black Knight Merger

The Federal Trade Commission (FTC) has filed a suit blocking the merger of the U.S.’s largest mortgage originators, real estate publication The Real Deal reported.

The FTC is seeking a temporary restraining order that would prevent the $11.7 billion purchase of mortgage software firm Black Knight by International Exchange Inc. (ICE), an Atlanta-based company that operates clearing houses and financial exchanges, including the New York Stock Exchange.

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Higher costs would be passed along to homebuyers as a result of the acquisition, the FTC claimed in the suit filed in San Francisco in mid-April.

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

Originally, the cash-and-stock deal was valued at $13.1 billion when it was first announced in May 2022. The boards of both companies have approved the merger, according to The Wall Street Journal.

In response to concerns about the transaction’s impact on competition, Black Knight said it would sell its loan origination software business, Empower, to a Wisconsin company, Constellation Web Solutions, according to court filings.

But the FTC did not embrace the offer. “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 FTC claimed that competition between ICE and Black Knight is good for consumers, the filings said, “and they should not be forced to bear the risk of a divestiture that fails to maintain this competition.”

In March 2022, the four FTC commissioners voted to challenge the deal in court. Its request for a temporary restraining order hopes to maintain current conditions while administrative hearings take place, beginning on July 12.