[Federal Register Volume 63, Number 169 (Tuesday, September 1, 1998)]
[Notices]
[Pages 46449-46451]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-23449]
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FEDERAL TRADE COMMISSION
[File No. 981-0127]
Commonwealth Land Title Insurance Company; Analysis To Aid Public
Comment
AGENCY: Federal Trade Commission.
ACTION: Proposed consent agreement.
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SUMMARY: The consent agreement in this matter settles alleged
violations of federal law prohibiting unfair or deceptive acts or
practices or unfair methods of competition. The attached Analysis to
Aid Public Comment describes both the allegations in the draft
compliant that accompanies the consent agreement and the terms of the
consent order--embodied in the consent agreement--that would settle
these allegations.
DATES: Comments must be received on or before November 2, 1998.
ADDRESSES: Comments should be directed to: FTC/Office of the Secretary,
Room 159, 6th St. and Pa. Ave., N.W., Washington, D.C. 20580.
FOR FURTHER INFORMATION CONTACT:
Willard Tom or Patrick Roach, FTC/H-394, Washington, D.C. 20580. (202)
326-2786 or 326-2793.
SUPPLEMENTARY INFORMATION: Pursuant to Section 6(f) of the Federal
Trade Commission Act, 38 Stat. 721, 15 U.S.C. 46 and Section 2.34 of
the Commission's Rules of Practice (16 CFR 2.34), notice is hereby
given that the above-captioned consent agreement containing a consent
order to cease and desist, having been filed with and accepted, subject
to final approval, by the Commission, has been placed on the public
record for a period of sixty (60) days. The following Analysis to Aid
Public Comment describes the terms of the consent agreement, and the
allegations in the complaint. An electronic copy of the full text of
the consent agreement package can be obtained from the FTC Home Page
(for August 26, 1998), on the World Wide Web, at ``http://www.ftc.gov/
os/actions97.htm.'' A paper copy can be obtained from the FTC Public
Reference Room, Room H-130, Sixth Street and Pennsylvania Avenue, N.W.,
Washington, D.C. 20580, either in person or by calling (202) 326-3627.
Public comment is invited. Such comments or views will be considered by
the Commission and will be available for inspection and copying at its
principal office in accordance with Section 4.9(b)(6)(ii) of the
Commission's Rules of Practice (16 CFR 4.9(b)(6)(ii)).
Analysis of Proposed Consent Order To Aid Public Comment
The Federal Trade Commission has accepted, subject to final
approval, an agreement containing a proposed Consent Order from
Commonwealth Land Title Insurance Company (``Commonwealth''), a
subsidiary of LandAmerica Financial Group, Inc. The proposed Consent
Order is designed to remedy the anticompetitive effects arising from
Commonwealth's proposed consolidation of its title plant for
Washington, D.C., with that of a competitor, First American Title
Insurance Company (``First American''). Title plants are privately
owned collections of records and/or indices that are used by
abstractors, title insurers, title insurance agents, and others to
determine ownership of and interests in real property in connection
with the underwriting and issuance of title insurance policies and for
other purposes. Under the terms of the agreement Commonwealth will be
required to take certain steps to ensure that its title plant is
operated as a separate, independent competitor; to restore its
customers to the competitively-determined prices and terms that existed
prior to the proposed consolidation; and to refund to its customers
amounts charged for title plant services during the pendency of the
proposed consolidation in excess of those prior prices and terms.
The proposed Consent Order has been agreed to by Commonwealth and
by its parent corporation.\1\ The Consent Order has been placed on the
public record for 60 days so that the Commission may receive comments
from interested persons. Comments received during this period will
become part of the public record. After 60 days, the Commission will
again review the agreement and the comments received, and will decide
whether it should withdraw from the agreement or make final the
agreement's proposed order.
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\1\ Since the time the proposed Consent Order was agreed to by
Commonwealth, Commonwealth has been acquired by Lawyers Title
Corporation, now known as LandAmerica Financial Group, Inc. The
proposed Order by its terms defines ``Commonwealth'' broadly to
include its parent, which has agreed to be bound by the terms of the
Order.
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Title plants are privately-owned collections of title information
obtained from public records that can be used to conduct title searches
or otherwise
[[Page 46450]]
ascertain information concerning ownership of or interests in real
property. Title plants typically contain summaries or copies of public
records or documents (often in a format that is comparatively easy to
store and readily retrievable) as well as indices to facilitate
locating relevant records that pertain to a particular property. Title
plants permit users to obtain real property ownership information with
significantly greater speed and efficiency than by consulting the
original public records, which may be located in a number of separate
public offices (e.g., offices of the county recorder, tax authorities,
and state and federal courts), may be stored in an inconvenient form,
and may be indexed in a fashion that makes it difficult to readily
research a particular property. Because of the county-specific way in
which title information is generated and collected and the highly local
character of the real estate markets in which the title plant services
are used, geographic markets for title plant services are highly
localized, consisting of the county or local jurisdiction embraced by
the real property information contained in the title plant.
As in other localities across the country, the use of title plants
in the District of Columbia is a result of difficulty in effectively
using public sources of title information to conduct title searches. A
complete title search in the District involves searching a number of
public sources of information, including land records and records of
the federal and local courts. As recently as 1980 there were as many as
seven title plants in the District, but by late 1996 plant closings and
consolidations had shrunk the number to two, operated by Commonwealth
and First American.\2\ In addition to using their respective plants for
their own title insurance businesses, Commonwealth and First American
each sold access to their plants to other title plant users. Most of
these users were independent abstractors or abstract companies
conducting title searches for title insurance companies or agents.
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\2\ There is one other very limited collection of title
information owned by the parent of Commonwealth and leased to a
local abstract company. This latter collection of materials is
inadequate for conducting title searches but is used by the abstract
company for reference purposes. The consent order in LandAmerica
Financial Group, Inc., Docket No. C-3808 (May 20, 1998), requires,
as to the District of Columbia, that Commonwealth's parent
LandAmerica Financial Group, Inc., divest either the Commonwealth
title plant interests or its interest in this more limited
collection of title information. LandAmerica has requested the
Commission's approval to divest the limited title information
collection to the abstract company to which it is leased.
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Beginning in 1996 or earlier, Commonwealth and First American began
to discuss consolidating their title plant operations in the District
of Columbia. The purpose of the consolidation was not merely to avoid
the duplication of expenditures attendant to the operation of two
plants, but also to eliminate competition between the two title plant
operators. Both firms had met the costs of the title plants's
operations by a combination of revenues received from plant users and
from their respective title insurance operations. According to a
proposal presented by Commonwealth to First American, the fundamental
premise of the consolidation was that the two firms should no longer
compete with each other by separately maintaining their respective
title plants but should take the ``final step'' of combining the last
two title plants in the District of Columbia so that costs could be
reduced and title plant services could be sold at pricing that was of
competitive pressure.
Commonwealth and First American in September 1997 executed a letter
setting forth their understanding that they would form a joint venture
entity to consolidate their respective title plant operations. In
November 1997, prior to the formation of the planned joint venture
entity, Commonwealth relocated its title plant to the same premises as
the First American title plant. At that time customers of both
Commonwealth and First American were required to execute new agreements
that stated that title plant services were being jointly provided by
Commonwealth and First American pending formation of a joint title
plant entity. Some forms of title plant access available to
Commonwealth users prior to the proposed consolidation were no longer
available under the interim agreements. The new rates set in these
interim agreements resulted in charges to Commonwealth customers as
much as two to three times higher than under the rates and terms
applicable to the same customers prior to the proposed consolidation.
Commonwealth and First American did not complete formation of the
planned joint title plant entity. After the proposed consolidation was
questioned by FTC staff, Commonwealth discontinued its participation in
the planned joint venture and undertook to re-establish its title plant
as an independent competitor to First American's on the terms embodied
in the proposed Consent Order.
The Complaint alleges two distinct grounds on which Commonwealth's
actions are a violation of the law. First, by undertaking with First
American to jointly set the prices for title plant services before the
planned joint venture was legally consummated, Commonwealth acted to
increase prices and restrict output in the market for title plant
services in the District of Columbia. This conduct had the effect of
raising, fixing, and maintaining the price, terms and conditions of
compensation paid for title plant services in the District of Columbia,
in violation of Section 5 of the FTC Act, 15 U.S.C. 45. This charge
conforms to prior Commission policy to apply established antitrust law
principles of liability to competitors that engage in coordinated
conduct in advance of the consummation of a planned merger or joint
venture. See The Torrington Co. and Universal Bearings, Inc., 114
F.T.C. 283 (1991).
In addition, the Complaint charges that the effect of the proposed
consolidation of the Commonwealth and the First American title plants,
if consummated, may be substantially to lessen competition and to tend
to create a monopoly, in violation of Section 7 of the Clayton Act, 15
U.S.C. 18, and Section 5 of the FTC Act, 15 U.S.C. 45, by eliminating
direct actual competition between Commonwealth and First American and
by increasing the likelihood that Commonwealth and First American,
acting in concert, can exercise market power in the market for title
plant services in the District of Columbia.
The proposed Consent Order requires Commonwealth to segregate its
title plant assets from those of First American, move its title plant
to a separate location and thereafter operate its title plant as a
fully functional title plant providing title plant services in
competition with First American. It further requires Commonwealth to
cease and desist from claiming any rights under the interim agreements
and for a period of one year to restore its users to the most recent
prices, terms and conditions in effect prior to the proposed
consolidation. In addition, the proposed Consent Order requires
Commonwealth to refund to its users all amounts paid for title plant
services during the pendency of the proposed consolidation, to the
extent the payments exceeded the amounts payable under the most recent
prior terms applicable to the user. If the respondent does not promptly
comply with these requirements, the Consent Order permits the
Commission to appoint a trustee to carry out the
[[Page 46451]]
required actions. Information available to the Commission indicates
that Commonwealth has complied with these remedial provisions of the
proposed Order.
The Consent Order also includes a requirement that for ten years
the respondent provide the Commission with prior notice of various
future transactions by the respondent involving title plant interests
in the District of Columbia. A prior notice provision is appropriate in
this matter because the small transaction size of most individual title
plant acquisitions is below the threshold of reportability under the
Hart-Scott-Rodino Act (Clayton Act Sec. 7A, 15 U.S.C. Sec. 18a) and
because the underlying conduct at issue establishes a credible risk
that the respondent will but for an order to the contrary, engage in
otherwise unreportable anticompetitive mergers.\3\ In addition, the
Consent Order prohibits Commonwealth, for a period of twenty years,
from entering into or attempting to enter into agreements or
understandings to raise, fix or stabilize prices for title plant
services in the District of Columbia.
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\3\ See Statement of FTC Policy Concerning Prior Approval and
Prior Notice Provisions (June 21, 1995).
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Properly structured joint ventures between competitors relating to
the production of needed supplies or services can reduce costs and
improve economic efficiency without unreasonably restricting
competition, where the joint venture preserves the freedom and
incentives for the joint venture partners to price and market their
goods or services competitively. See, e.g., United States v. Alcan
Aluminum Ltd., 605 F. Supp. 619 (W.D. Ky. 1985) (DOJ Consent); Ethyl
Corp. and The Associated Octel Company Limited, and Great Lakes
Chemical Corporation, Docket Nos. C-3814 and C-3815 (June 16, 1998).
The proposed Consent Order does not prohibit Commonwealth from entering
into arrangements with First American or anyone else to share or reduce
the costs of carrying on its title plant operations, so long as the
arrangements do not compromise Commonwealth's pricing independence or
fix or stabilize the prices or rates for title plant services. Any such
arrangements would be subject to review by the Commission under the
prior notice provisions of the proposed Order.
The purpose of this analysis is to facilitate public comment on the
proposed Consent Order, and it is not intended to constitute an
official interpretation of the agreement and proposed Consent Order or
to modify in any way their terms.
By direction of the Commission.
Donald S. Clark,
Secretary.
[FR Doc. 98-23449 Filed 8-31-98; 8:45 am]
BILLING CODE 6750-01-M