The Federal Trade Commission (FTC) this week postponed an administrative hearing on its bid to block the sale of Black Knight Inc. to Intercontinental Exchange Inc. (ICE) to allow a federal court to rule first on its request for a preliminary injunction in the case.
In March, the FTC issued an administrative complaint challenging the sale, saying it would drive up costs, reduce innovation, and reduce lenders’ choices for tools necessary to generate and service mortgages.
The following month, the FTC filed a petition in federal court in California seeking a temporary restraining order and preliminary injunction to halt the sale. In its petition, the FTC states it “requires the aid of this court to maintain the status quo and prevent interim harm to competition during the pendency of an administrative proceeding on the merits.”
On Tuesday, the commission granted a joint motion agreed to by all parties to postpone the start of the commission’s administrative hearings on the case from July 12 to Sept. 25.
“The parties made this submission because the District Court … expressed its view that the hearing in the … case should precede the administrative hearing,” the motions states.
The motion states that there are several deadlines related to the administrative hearing that occur this week, including the submission of “a joint statement regarding witness scheduling,” which was due June 28; submission of objections to witness lists and exhibit lists,:” due June 29; and submission of pretrial briefs, motions, and responses to motions, due June 30.
“In light of these developments, the parties respectfully request that the Court suspend all prehearing deadlines in the scheduling order to conserve the resources of the Court, the parties, and third parties while the Commission considers the parties’ request,” the motion states. “In the event that the Commission grants the parties’ request, the parties agree to confer on revised deadlines consistent with a Sept. 25, 2023, start to the evidentiary hearing in this proceeding.”
The commission granted the motion, rescheduling the evidentiary hearing in the case for 10 a.m. on Sept. 25, and extending “all related pre-hearing deadlines” by 75 days.
In its petition for the injunction, The FTC states that ICE’s Encompass loan origination system (LOS) and Black Knight’s Empower LOS are the two largest systems in the U.S. Both companies also offer ancillary services, it states, including Black Knight’s Optimal Blue product pricing and eligibility engine (PPE), “software that allows a lender to identify potential loan rates for a borrower, determine the borrower’s eligibility for a given loan, and lock in the loan’s terms for the borrower.”
“Black Knight’s Optimal Blue is the clear industry leader, serving lenders that originate as much as 40% of the nation’s residential mortgages each year,” the FTC’s petition states.
ICE’s Encompass Product and Pricing Service PPE (EPPS) is a close second, it notes.
In a move taken in hopes of appeasing the FTC, ICE and Black Knight Inc. announced March 7 that they had reached an agreement to sell Black Knight’s Empower LOS to a subsidiary of Constellation Software Inc. Under terms of the agreement, the Empower sale is subject to ICE closing its acquisition of Black Knight, as well as to other "customary closing conditions," the companies said.
Based on the potential sale of Empower, the overall price to acquire Black Knight was reduced from $13 billion to $11.7 billion, the companies said.
The FTC, however, states In its injunction petition that the proposed sale of Empower does not resolve its concerns about the anticompetitive nature of the deal.
Without the temporary restraining order and preliminary injunction, the petition states, ICE and Black Knight “have represented that they will close the acquisition immediately following a vote of Black Knight shareholders scheduled for April 28, 2023.”
The petition adds that “preliminary relief is warranted and necessary. Should the commission rule, after the full administrative proceeding, that the acquisition is unlawful, reestablishing the status quo would be difficult, if not impossible, if the acquisition has already occurred in the absence of preliminary relief.”
Judge Araceli Martinez-Olguin, the federal judge assigned to the case, has not yet ruled on the petition.
