The Federal Trade Commission announced Thursday that it would require one of the world’s largest commercial real estate data firms, District-based CoStar Group, to sell a business unit and make other concessions in order to complete its planned $860 million acquisition of rival LoopNet.
To comply with FTC’s concerns that the deal would be anti-competitive, District-based CoStar would sell LoopNet’s interest in the data provider Xceligent and the rights to the Web address “commercialsearch.com” to DMG Information, Inc., an American subsidiary of the British media and data firm Daily Mail & General Trust.
CoStar and LoopNet mutually announced last week that had reached a settlement with FTC staff and that they hoped to close the merger by April 30. The FTC voted 4-0-1 to accept the agreement.
CoStar chief executive Andrew C. Florance said in an interview that he expects the deal to close Monday, April 30.
Richard Feinstein, director of the FTC’s Bureau of Competition, issued a statement saying data provided by firms like CoStar and LoopNet “are critical to their customers in the commercial real estate industry.”
“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,” Feinstein said.
Florance said he did not think the FTC’s requirements would harm prospects the new company, which he said would combine the data expertise of CoStar and the marketing power of LoopNet.
“We’re happy to compete basically on the quality if the product. We’re happy to not agree not to do things limiting people’s choice. I think we have the best marking solution now; we think we have the best information solution. We’ll let those products compete on their own merits,” Florance said.
Florance said he was not concerned about the loss of Xceligent, a LoopNet data provider. “That did not come as surprise to us and I think was appropriate for them to ask,” he said.
The new CoStar-LoopNet has also agreed not to restrict customers’ ability to support Xceligent; to allow customers to terminate existing contacts without penalty with one year’s notice; to not require customers to buy any of its products as a condition of buying other products and to continue offering customers core stand-alone products for at least three years after the merger.
Florance said the FTC had expressed concern that the new CoStar entity would lock customers into long-term deals, preventing other data firms from competing. But he said only about 7 percent of existing CoStar contracts are for more than a year and he did not expect customers to back away because of restrictions on long-term contracts. “I don’t think they will cancel at a materially higher rate just because they are one-year deals,” he said.
The conditions will be available for public comment until May 28.
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