The Federal Trade Commission’s Bureau of Competition works with the Bureau of Economics to investigate alleged anticompetitive business practices and, when appropriate, recommends that the Commission take law enforcement action. And over the years, Verisk has been a hot button target of the FTC. In December of 2014, the FTC investigated the merger between Verisk and EagleView, a $650 Million merger, and filed a complaint, as follows,
Pursuant to the provisions of the Federal Trade Commission Act, and by virtue of the authority vested in it by said Act, the Federal Trade Commission (the “Commission”), having reason to believe that Respondents Verisk Analytics, Inc., Insurance Services Office, Inc. (together, “Verisk”), and EagleView Technology Corporation (“EagleView”) (collectively, “Respondents”) have executed an agreement pursuant to which Verisk will acquire the assets of EagleView, in violation of Section 5 of the FTC Act, 15 U.S.C. § 45, and which if consummated may substantially lessen competition in violation of Section 7 of the Clayton Act, 15 U.S.C. § 18, and Section 5 of the FTC Act, and it appearing to the Commission that a proceeding by it in respect thereof would be in the public interest, hereby issues its complaint pursuant to Section 5(b) of the FTC Act, 15 U.S.C. § 45(b), and Section 11(b) of the Clayton Act, 15 U.S.C. § 21(b) […].
According to the FTC’s complaint, damage to rooftops accounts for more than a third of all property insurance claims in the United States. Insurance carriers need roof measurements to calculate the costs associated with replacing or repairing rooftops. Until 2008 — when EagleView first offered its roof reports using proprietary software to analyze aerial images — insurance adjusters climbed roofs to measure the perimeter, slope, and other dimensions by hand. Today, insurance carriers use rooftop aerial measurement products for several reasons, including because they are safer, faster, and more accurate than traditional manual measurement. To that point, FTC blocked Verisk’s proposed acquisition of Eagle View Technologies, a provider of aerial imagery and data analytics software for the roofing industry. The FTC argued that the acquisition would have given Verisk too much control over the roofing software market and would have harmed competition.
Verisk is no stranger to dirty pool when it comes to taking what they want and circumventing the law. In 2019, a New Jersey jury ordered insurance data services firm Verisk to pay $125 million to aerial imaging firm EagleView — the very same EagleView that the FTC prevented their purchasing of, for lost profits linked to Verisk infringing on various EagleView patents. And that decision was upheld with no new trial granted by the federal court on 10 September 2020.
By way of comparison, the recent acquisition of virtually all of the software used in the property preservation sector, excluding inspections, has been purchased by Verisk, through its subsidiary Xactware Solutions, Inc. (Xactware). Verisk acquired Property Preservation Wizard (PPW) on August 29, 2019, for $15 Million. Then, Verisk acquired Pruvan on May 18, 2022, for $4.8 Million. PPW was the largest provider of software to the Mortgage Field Services Industry and Pruvan was the only competition to PPW, at the time. Upon purchase, Verisk raised the prices of software offered by both PPW and Pruvan, which is of note when it comes to both antitrust and Clayton Act violations.
In fact, in November of 2019, the FTC considered the Verisk situation so untenable that in front of the Subcommittee on Antitrust, Commercial and Administrative Law of the Judiciary Committee, United States House of Representatives testimony in the 116th Congress, FTC Chairman Joe Simons stated as follows,
For example, in 2014 the Commission moved to block Verisk Analytics, Inc.’s proposed acquisition of EagleView, alleging that the proposed transaction would result in a virtual monopoly in the U.S. market for rooftop aerial measurement products used by insurers to estimate repair costs for property damage claims. Verisk had recently entered into direct competition with EagleView by developing its own library of high-resolution aerial images, and the elimination of the firms’ ever-closer competition would likely lead to higher prices and reduced incentives to innovate.
Building on that, Verisk has incorporated its own bidding software as the only bidding software allowed for its property preservation customers by and through their recent purchasing of PPW and Pruvan. This means that all contractors and vendors must use Verisk’s bidding software to submit bids upward to their Clients whom include the Department of Housing and Urban Development (HUD), the United States Department of Agriculture (USDA), Veterans Affairs (VA), all government sponsored entities (GSE) such as Fannie Mae and Freddie Mac, and all financial institutions whom have services performed upon distressed assets. It should be noted that in all of these cases US taxpayer dollars are involved.
Verisk’s acquisition of PPW and Pruvan has raised antitrust concerns. Some critics argue that Verisk’s dominance in the property preservation software market gives it too much power over contractors and vendors. They also argue that Verisk’s decision to require its customers to use its bidding software is anticompetitive.
HUD’s Craig Karnes, Assistant Chief Procurement Officer for Field Operations, Office of the Chief Procurement Officer, had this to say about the Verisk purchases on 26 January 2023,
I don’t know that it would move into the Anti-Trust space yet, but it does certainly appear to be headed in that direction. The price hikes as they gobble up the competition would certainly help lay the groundwork for an Anti-Trust case. Either way, it does certainly raise certain security concerns. I know that it’s at least on HUD’s radar, as it came up in an internal meeting I was in a couple weeks back where concerns were raised.
The fact that HUD was looking at the situation and had refused to investigate the matter is extremely troubling in light of their Management and Marketing (M&M) Field Service Manager (FSM) contract. Even more telling, though, has been HUD’s recent refusal to cooperate with media inquiries since our investigation of Verisk. For the past decade, there have been no issues and now Freedom of Information Act (FOIA) requests are the only way to address issues. This malfeasance lies squarely at the feet of Karnes, himself. The utilization of FOIA burdens not only the media, but additionally HUD staffers whom must contend with the issues which could have been informally addressed. It is a proverbial black eye to an agency that can least afford controversy in the midst of a $37 Trillion deficit.
It has been rumored, for months now, that the National Association of Mortgage Field Services (NAMFS) has been engaging with HUD policy level officials, by and through their paid relationship with Gatehouse Strategies. Part of that problem is that Foreclosurepedia believes NAMFS is being used to negotiate Verisk matters. Many will remember our reporting upon Brian Montgomery, a co founder of Gatehouse and the former HUD Secretary, under the Trump Administration — reporting we did under threat of litigation by Gatehouse it should be noted. And while some of the NAMFS – Gatehouse engagement may be of a legitimate nature, the reality is that NAMFS is not representing an entire Industry which is required to maintain their IRS nonprofit status. NAMFS focuses only upon Management. And for years, the wholesale fraud and bankruptcies executed by NAMFS Officers, such as Heather Berghorst, former NAMFS Secretary, or the recent Involuntary Bankruptcy of National Field Network are only but a few cases available throughout Foreclosurepedia. Moreover, the gargantuan settlements of Employee Misclassification claims, in the tens of millions of dollars, by firms such as MCS, owned by yet another financial behemoth, Littlejohn & Co. whom, in turn, owns GIS Field Services, is reason enough for the FTC to dig a bit deeper into the Verisk mess. And FTC may want to ask why Littlejohn and Chestnut Hill Partners completely redacted Littlejohn’s purchase of GIS within hours of our inquiry. You can view the Wayback Machine snapshot documenting such in the afore-linked article.
Fact of the matter is that Verisk has completely co-opted NAMFS. NAMFS President, Matt Zoldowski, sold PPW to Verisk. And the NAMFS Executive Director, Eric Miller has attended multiple junkets provided by Verisk. While currently unsubstantiated, Foreclosurepedia believes that Miller is paid by Verisk for unknown roles. At minimum, we have found email addresses which list Eric Miller in their publicly scannable assets. The coup de grâce was the recent almost total comping of the NAMFS annual convention which was more of a Verisk Infomercial than a trade association conference.
Here is how the FTC relates the end result of antitrust implications such as those presented by the recent Verisk purchases in the Mortgage Field Services Industry,
What if there were only one grocery store in your community? What if you could buy a phone from only one retailer? What if only one dealer in your area sold cars?
Without competition, the grocer may have no incentive to lower prices. The phone shop may have no reason to offer a range of choices. The car dealer may have no motivation to keep its showroom open at convenient hours or offer competitive financing.
Competition in America is about price, selection, and service. It benefits consumers by keeping prices low and the quality and choice of goods and services high. Competition also encourages businesses to offer new and better products.
Competition makes our economy work. By enforcing antitrust laws, the Federal Trade Commission helps to ensure that our markets are open and free. The FTC promotes free and open competition and challenges anticompetitive business practices to make sure that consumers have access to quality goods and services at competitive prices, and that businesses can compete on the merits of their work. The FTC does not choose winners and losers — you, as the consumer, do that. Rather, our job is to make sure that businesses are competing fairly within a set of rules.
While I rarely like to create articles which exceed 1000 words, the reality is that there are a few other items to add here. First, FTC’s BoC is quite clear in their intent when it comes to reading through contracts that constrain its ability to investigate, Here is how they cite a prominent case which appears to have bearing on some of the contracts between Verisk and their employees I have seen,
Case law clearly establishes that contractual provisions that impair or prohibit the ability to communicate freely with an administrative agency acting within its statutory mandate are void and unenforceable. To take just one example, in EEOC v. Morgan Stanley & Co., the court voided a contractual requirement that required all employees, current or former, to provide the employer notice and copies of all documents served upon them by any court, agency, or regulatory authority.
As the court explained, there was “significant public interest in encouraging communication” with the federal agency, it was “crucial” that the agency be able to conduct investigations, and those investigations required access to information, including relevant employees. The “chilling impact” that these kinds of provisions can have was contrary to public policy. Many other courts have similarly struck down these contractual clauses where they could otherwise prevent a government agency from seeking and obtaining complete, candid information in furtherance of a statutory mandate.
Over the next several weeks, we will begin to perform the due diligence that the Foreclosurepedia Nation has come to expect. In addition, Foreclosurepedia will be submitting our documents and articles to the FTC for a potential antitrust investigation. If you have information you believe would be beneficial to the investigation please reach out direct or through the Foreclosurepedia Nation Newsletter.
For a deeper dive, here is a court document to bring you up to speed on how Verisk has been infecting the insurance marketspace of which FHA issues insurance upon HUD assets. It is a great read. With that have a great weekend and we will be back with more Monday!
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