FTC Sets Conditions for LoopNet/CoStar Merger

The FTC has stepped in on an MLS merger it fears would inhibit competition and disadvantage consumers.

An acquisition that would merge the two largest commercial MLS services in the nation has come under fire from the Federal Trade Commission (FTC) for its anti-competitiveness.

The merger, in which CoStar would purchase LoopNet, is an $860 million dollar deal, and the FTC alleges in a a consent order that because the two firms are the only providers of such a national listing service, the deal would violate competition laws in the U.S.

The two firms contain more than 2.3 million listings, and the FTC stated that with such reach, brokers, lenders and investors would be restricted by the deal, and as a result, would be unable to use a variety of sources to better-inform their asking prices and deals.

Some of the FTC’s conditions include:

  • CoStar is required to sell LoopNet’s interest in Xceligent to DMG Information; covering 33 metro areas, Xceligent is a commercial MLS and data firm that is CoStar’s biggest competitor.
  • As part of the transfer, DMG will also buy the “commercialsearch.com” URL.
  • There must be noncompete provisions for CoStar customers that would allow them to terminate longer-term contracts.
  • CoStar is not allowed to impede customers from moving to Xceligent for five years.
  • For three years after the merge, CoStar or LoopNet can only offer stand-along products, or, products that do not require other products to function.

Richard Feinstein, director of the FTC bureau of competition, said in a HousingWire article on the merger that given the two MLS’ importance to the industry, its interference in the matter was necessary.

“The listings databases and information services provided by these companies are critical to their customers in the commercial real estate industry,” Feinstein said. “By maintaining Xceligent as an independent competitor and ensuring Xceligent’s ability to grow and expand, the FTC’s settlement order will foster continued competition in these markets.”

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