FTC Approves LoopNet - CoStar Merger With Conditions

After a year of scrutiny, the Federal Trade Commission (FTC) resolved its competitive concerns over the merger of two firms that provide commercial real estate (CRE) listings and other data. In April 2011, CoStar Group, Inc. announced plans to acquire LoopNet, Inc. for approximately $860 million. Two days ago, the FTC announced that it had approved a consent decree with CoStar and LoopNet, which sets forth the conditions to which the parties agreed for the merger to proceed. Click here to view the FTC's announcement and the underlying papers.

The consent decree not only requires the divestiture of LoopNet's interest in Xceligent, which the FTC describes as a "significant provider" of CRE information in the U.S., but also provides for a number of conduct remedies meant to help Xceligent replace the competition lost by the merger. The FTC is increasingly using conduct provisions in consent decrees to help remedy perceived harm to competition.

CoStar is the largest provider of CRE information services in the U.S. It aggregates listings and information to create and maintain a comprehensive CRE database. LoopNet operates the most heavily trafficked CRE listings database in the United States. Xceligent provides a research-driven database similar to CoStar and is the third leading provider of CRE information services. LoopNet owns a substantial stake in Xceligent.

The FTC alleged that the acquisition may substantially lessen competition in the markets for CRE listings databases and CRE information services by eliminating competition between CoStar and LoopNet, and between CoStar and Xceligent. The FTC found that significant barriers to entry existed, such that the anticompetitive effects of the merger would be durable.

To remedy the anticompetitive effects of the acquisition, the FTC required the parties to divest Xceligent to a third party, DMG Information, Inc., a subsidiary of British conglomerate Daily Mail & General Trust, PLC. In addition to the Xceligent assets, the parties agreed...