FTC officially moves to challenge ICE-Black Knight deal

$13.1 billion acquisition in jeopardy as commission cites competitive harm in blocking merger

The Federal Trade Commission (FTC) has officially taken action to block the proposed merger between Intercontinental Exchange (ICE) and Black Knight.

The tech titans are two of the largest providers of digital loan origination tools and data to the mortgage lending industry. ICE and Black Knight first publicized the transaction in May 2022, when it was announced that ICE entered into a definitive agreement to acquire Black Knight in a cash-and-stock deal with a market value of $13.1 billion.

Initially, the two companies projected that the transaction would close in the first half of 2023, pending the requisite regulatory and stockholder approvals. But the FTC has decided to intervene, saying in a statement that the deal would “drive up costs, reduce innovation and reduce lenders’ choices for tools necessary to generate and service mortgages.”

The commission chose to challenge the merger in a unanimous 4-0 vote.

“For many Americans, buying a home is an important investment toward building financial security,” said Patty Brink, acting deputy director of the FTC’s 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’s action isn’t surprising. Citing anonymous sources, Politico broke news last week that a challenge to the merger was in the works and would be announced “some time in March.” Specifically, the FTC noted that ICE is the company behind Encompass, the most widely used loan origination system (LOS) in the U.S. mortgage market. The second most widely used LOS, Empower, comes from Black Knight. Having both products integrated under the same corporate umbrella would result in market domination that would be detrimental to lenders and consumers, the FTC determined.

According to the FTC, removing Black Knight as a competitor would free up ICE to “more aggressively raise prices” for its various digital lending products, particularly Encompass. The FTC’s administrative complaint pointed to internal ICE documents that indicate the use of several “levers” to maximize its revenue, including raising prices for Encompass users.

In hopes of avoiding an FTC challenge, Black Knight announced on Tuesday that it had reached an agreement to sell Empower to a subsidiary of Constellation Software Inc., contingent on ICE’s proposed acquisition being realized.

But the effort to secure clearance appears to be too little, too late, with the FTC announcing the challenge just two days after the announcement of Empower’s conditional sale. The commission acknowledged the proposed remedy but concluded that the sale of Empower would not address the anticompetitive effects of ICE taking the reins of Black Knight’s other products, such as its product pricing and eligibility engines (PPEs). As with loan origination systems, PPEs owned by ICE and Black Knight are two of the most widely used within the mortgage market.

Scott Olson, executive director of the Community Home Lenders of America (CHLA), applauded the FTC’s move. Olson and the CHLA have been some of the most outspoken detractors of the proposed acquisition, specifically calling out the potential harm to small, independent lenders that an ICE-Black Knight union could cause.

“CHLA strongly commends the FTC for taking legal action to block the purchase of Black Knight by ICE, confirming what we have said all along — which is that the purchase would harm competition and lead to higher costs for lenders and homebuyers,” Olson said.


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