Waters raises new antitrust concerns over ICE-Black Knight merger

Photo by Al Drago/Bloomberg

Following the recent Federal Trade Commission decision to drop a legal case that could have  nixed the proposed Intercontinental Exchange merger with Black Knight, Rep. Maxine Waters reiterated antitrust concerns in a new letter. 

In the letter this week addressed to commission chair Lina Khan, the California Democratic congresswoman and current ranking member of the House Committee on Financial Services laid out specific requirements she hoped the FTC would place on the two mortgage software firms as it negotiates with them. 

"In addition to potentially creating a housing finance conglomerate that would dwarf all other players in the industry, I remain concerned that this merger has the potential to harm consumers by displacing competing products and businesses," her letter said. 

In order to appease regulators and improve the chances of acquisition approval, the two companies agreed to sell Black Knight's Optimal Blue product and pricing engine and Empower loan-origination system in separate transactions to Toronto-based Constellation Software this year. Waters listed several conditions related to the divestiture of these assets she said should be agreed to before the merger closed. 

"The merging parties should be prohibited from shackling Constellation Software Inc. with noncompete clauses and other contractual provisions that would limit them from integrating or merging with other third parties in the mortgage technology market."

A full accounting of the assets included in the Constellation transactions were not included in filings with the Securities and Exchange Commission, according to Waters. She said the FTC needed to account for how mortgage technology products would be sold or bundled in the market and ensure Black Knight includes all necessary items in the sales to Constellation to maintain a competitive business environment.

Without an itemized list of what was being offloaded, Waters said Constellation Software could potentially be "dependent on the new ICE-Black Knight conglomerate for Empower and Optimal Blue to be fully functioning products in the market."

As then chair of the financial services committee, Waters penned a different letter at the end of 2022 highlighting earlier concerns. Industry analysts at the time said the correspondence likely ensured the proposed merger would receive a close look from government regulators. At the time the merger was initially announced over a year ago, ICE stated it did not expect it would need to sell Empower to receive regulatory approval.

Competitors within the mortgage space over the past year publicly stated a potential merger would have a detrimental effect on the industry. Many of the issues raised by Waters have been echoed by various other housing leaders, such as the Community Home Lenders of America, who also said it could make home buying increasingly unaffordable for consumers. 

In her latest letter, Waters also emphasized to the FTC that it needed to examine the merger's impact on affordability and receive guarantees from a combined entity that local communities' needs became a priority.

In addition to issues surrounding antitrust, Waters said she expected any newly merged company would make investments to "advance fairness and equity," impose strong executive accountability and establish a board to ensure it adequately meets needs of the public, notably underserved borrowers and community lenders.  

"As our nation continues to grapple with crisis-level housing affordability and supply issues, it is vital that the federal government does not create conditions that exacerbate these challenges," she wrote.