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From Antitrust Law Daily, December 17, 2014

FTC challenge sinks combination of roof measurement service providers

By Jeffrey May, J.D.

Verisk Analytics, Inc. has dropped its plans to acquire EagleView Technology Corporation after the FTC issued an administrative complaint yesterday, alleging that the deal threatened to harm competition in the market for rooftop aerial measurement service used by insurers to assess claims (In the Matter of Verisk Analytics, Inc., FTC Dkt. 9363, File No. 141 0085).

Verisk, which provides information about risk to the insurance industry, said that the company “worked hard to come to a mutually agreeable solution with the FTC, but no agreement could be reached that was in the best interests of our shareholders.” Despite the decision to abandon the acquisition, the company pledged to “pursue our development of imagery analytics, which will allow our customers to benefit from our deep industry expertise and technology advances.”

When Verisk announced the proposed transaction in January 2014, it said that the combination would “accelerate Verisk's position as a key provider of data, analytics, and decision support solutions based on aerial imagery.” At the time, it was noted that EagleView “maintains one of the most comprehensive image libraries, covering more than 85 percent of the U.S. population, more than one million square miles, and approximately 90 percent of total U.S. structures.”

As alleged in the FTC complaint, the now-abandoned acquisition would have eliminated head-to-head competition between the only two meaningful providers of rooftop aerial measurement products to U.S. insurance carriers. The FTC’s proposed relevant market excluded manual measurement services, as well as rooftop aerial measurement services for non-insurance purposes, such as for contractor estimates. Even if the non-insurance customers were included, the acquisition would have eliminated competition between the closest and only significant competitors to capture aerial images across the rest of the country, the agency asserted.

EagleView is the self-proclaimed “industry standard” in rooftop aerial measurement products, controlling approximately 90 percent share of the relevant market and serving 24 of the top 25 insurance carriers, according to the FTC. It was alleged that EagleView successfully asserted patent rights in its aerial measurement services to eliminate actual and potential competitors.

Verisk owns the dominant software platform through which insurers use rooftop aerial measurement products to estimate property damage claims and offers two roof measurement products, which together pose the only meaningful competition to EagleView, in the FTC's view. Verisk is in the best position to continue competing vigorously with EagleView, according to the agency. Verisk has a strong incentive to withstand the threat of patent litigation from EagleView and has relationships with insurers. The FTC suggested that some quality competition had already been lost since the firms reached an agreement on the acquisition. Verisk purportedly dropped efforts to capture additional aerial images to support new products as the proposed acquisition began to move forward.

While the public version of the complaint has significant redactions, the FTC included quotes of company executives that apparently supported the government's view that the combination would have been anticompetitive. Using internal company documents against parties to a proposed merger has become a common tactic of the federal antitrust agencies. Recently, the Department of Justice included quotes from company documents and executives in its complaints challenging the combinations of US Airways and American Airlines and Anheuser-Busch InBev and Corona brewer Grupo Modelo. Both of those deals were ultimately allowed to proceed under the terms of U.S. consent decrees.

FTC Bureau of Competition Director's reaction. “The parties’ decision to abandon this transaction preserves competition in the U.S. market for rooftop aerial measurement products used by the insurance industry to assess property claims,” said FTC Bureau of Competition Director Deborah Feinstein in a statement released today. “A combination of the only two significant competitors in this market would have likely led to higher prices for both insurance companies and consumers.”

Companies: EagleView Technology Corp.; Verisk Analytics, Inc.

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