When it comes to negotiating merger remedies with federal antitrust enforcement agencies, the Department of Justice and the Federal Trade Commission each have guides or statements that may help. But as good as their guidance may be, sometimes the fix for a merger is as close as the end of your nose.
Back on July 1, 2013, for example, CoreLogic,Inc. (“CoreLogic”) announced its plan to acquire certain assets and other interests from TPG VI Ontario 1 AIV L.P., including its DataQuick Information Systems, Inc. (“DataQuick”) national real property public records bulk data business, for $661 million. At that time, CoreLogic and DataQuick were two of three competitors offering real estate national assessor and recorder bulk data, which consists of aggregated current and historical assessor and recorder data for the vast majority of U.S. properties. Together assessor and recorder data provide information about property ownership, status, and value.
After investigating the proposed deal, the FTC concluded that the deal “would significantly increase concentration in an already highly concentrated market for national assessor and recorder bulk data.” Specifically, the FTC found that national customers could not cobble together an alternative using “regional assessor and recorder bulk data” providers to meet their needs, and that regional providers would not expand their offerings to provide national assessor and recorder bulk data.
How did CoreLogic remedy the FTC’s concerns? Corelogic agreed to license its national and recorder bulk data as well as several ancillary data sets that DataQuick provided to customers to Renwood RealtyTrac. This licensing arrangement satisfied the FTC that competition lost due to the transaction could be replaced by facilitating entry into the market.
The irony of this is that DataQuick obtained historical data through a prior acquisition and since 2004 had obtained on-going national assessor and recorder bulk data primarily through a license with CoreLogic. That license allowed DataQuick to re-license the data in bulk and act independently of CoreLogic. In the FTC’s words, the deal “allows RealtyTrac to step into the shoes of DataQuick as CoreLogic’s licensee.” And, in what might turn out to be a boon for DataQuick customers, the deal requires CoreLogic to provide certain DataQuick customers with the opportunity to terminate contracts early and switch to RealtyTrac. The reason for that is to give “RealtyTrac more customers to compete for and will ensure that all DataQuick customers will be able to take advantage of RealtyTrac’s entry during the first three years RealtyTrac is in the market.”
To be sure, federal enforcement agencies often are suspicious of licensing remedies because their efficacy may be uncertain, and they require competitors to occupy a close and continuing business relationship with each other. But here, in a business where licensing evidently had worked competitively for a decade, the parties were able to allay any qualms the FTC may have had about licensing as a remedy.
But why pay $661 million to acquire a competitor to just turn around and enter into a deal that requires a license agreement that replaces the competition lost due to the transaction and opens up contracts to new competition? The answer to that question may have to do with the parties’ Purchase and Sale Agreement. It required CoreLogic to “use commercially reasonable efforts to obtain any required approval from any Governmental Authority and to prevent the initiation of any lawsuit by any Governmental Authority under any Antitrust Laws or the entry of any decree, judgment, injunction, or order that would otherwise make the transactions contemplated by this Agreement unlawful.” One could suppose that if you already had a license agreement that enabled the firm you are buying to compete, entering into a new license agreement that facilitated entry to “obtain [the] required approval” would be “commercially reasonable.” All of this goes to show how everyday business dealings and the details of transactional documents really matters.