[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]


=======================================================================
-----------------------------------------------------------------------

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.

-----------------------------------------------------------------------

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.
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \3\ See Statement of FTC Policy Concerning Prior Approval and 
Prior Notice Provisions (June 21, 1995).
---------------------------------------------------------------------------

    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