Cox sues CDK, cites anticompetitive practices

In a battle between two dealership vendor giants, Cox Automotive has sued CDK Global Inc. for anticompetitive business practices.

The 11-count lawsuit against CDK, filed Monday in the U.S. District Court for the Western district of Wisconsin, largely focuses on anticompetitive behavior. Court documents don’t specify how much Cox is seeking in damages, but state: “The damage to the automotive industry has been immense, with the damage to Cox Automotive alone from its antitrust claims exceeding $ 200 million — before the automatic trebling provided for by the nation’s antitrust laws.”

A Cox Automotive spokeswoman said in an emailed statement, “We are seeking a level playing field for our business and the industry at large. Cox Automotive believes the unfair, unreasonable and unlawful business practices of CDK, as alleged in the complaint, are unsustainable and required action.”

A CDK spokesman said the company doesn’t comment in detail on matters of litigation.

Collusion

On its website, Cox said that it had filed the lawsuit, and provided a link to the suit itself.

CDK and Reynolds and Reynolds Co., which Cox called a co-conspirator but is not a party to the suit, have colluded to eliminate competition in dealership data integration, the complaint said.

“Where there was once a robust market for providing data integration services, CDK and Reynolds — through their coordinated conduct — have destroyed that competition. Where CDK and Reynolds once themselves competed in that market, they have now entered into a written covenant not to compete,” the complaint said. “Moreover, where CDK and Reynolds once offered data integration services on a level-playing field, they now place artificial and anticompetitive restrictions on dealer data in order to maintain their dominance over the Dealer Management Systems market, favor their own products and services, and injure competing products and services.”

Vendors under the Cox Automotive umbrella have been directly affected by CDK and Reynolds’ alleged collusion because Cox’s products and services compete with those offered by CDK and Reynolds, the suit contends.

‘Destroy competition’

Not only are CDK and Reynolds aiming to diminish competition for data integration services, but “they are seeking to impair and destroy competition for the products and services that vendors offer, and upon which dealers rely,” the complaint said.

By doing so, Cox claims that CDK and Reynolds have taken control over dealerships’ data.

The DMS giants have “thwarted” dealerships’ ability to control access to and usage of their own data “with no lawful or legitimate purpose,” the complaint said.

They strive to eliminate competition and harm their peers in the market, the complaint said. “The result is that the competitive playing field is not only uneven, but, as CDK itself has described it in internal presentations to its executive team, ’tilted’ in the extreme in favor of CDK.”

Among the counts in the lawsuit are violations of the Sherman Antitrust Act in the form of conspiracy, restraint of trade and monopolization, as well as breach of contract and unfair trade practices, according to court documents.

CDK-Reynolds agreement

A lawsuit filed by Authenticom, a data integration service provider, on May 1 cited a February 2015 document in which CDK and Reynolds agreed that they would no longer compete in the dealership data integration market. Under the written agreement, CDK and Reynolds would be the exclusive data integration providers for data on their respective DMS platforms.

The agreement protects CDK and Reynolds’ duopoly in the DMS market, “choking off the natural progression of dealer operations to more efficient and less expensive vendor software solutions,” Cox’s complaint, which referenced the Authenticom suit, said. And by eliminating data integration competition, CDK and Reynolds have demanded that vendors pay exorbitant fees for access to and use of the dealerships’ data, it contended.

Vendors that integrate into Dealertrack’s DMS, a Cox product, must pay about $ 50 per rooftop per month per integration, compared to $ 250-$ 1,000 for vendors that integrate with CDK’s DMS, one source said.

Those fees are often passed onto the dealership. The fees make Cox’s products and services less appealing than Reynolds and CDK products, which do not have to pay integration fees, the complaint said.

CDK and Reynolds have plotted to control data integration to restrict other vendors’ access and use of dealerships’ data, the complaint said.

For example, Cox cited in its complaint, CDK has denied Dealertrack’s Sales and F&I access to prevent it from electronically contracting a lease transaction, requiring dealerships to double-enter data for lease contracts.

“There is no technological or other credible reason for CDK to withhold this functionality from Dealertrack’s Sales and F&I solutions other than for an anticompetitive reason: to favor CDK’s own F&I solutions,” the complaint said.

CDK also restricts products from Cox’s Xtime from creating or modifying a repair order in the DMS but allows its Service Edge application, a CDK product, to do so.

According to internal CDK documents, referenced by Cox, CDK wants “to disrupt the workflow” by stopping Xtime’s products from creating or modifying repair orders in order to give CDK’s Service Edge product an advantage.

Other allegations

Cox also claimed that CDK breached its contract, engaged in unfair trade practices and defamed Cox.

CDK told Cox Automotive it had to enter its third-party access agreement for a fee, but secretly agreed to provide the same services to Reynolds free of charge for five years, which violates California’s Unfair Trade Practices Act and breaches CDK and Cox’s contract, the lawsuit contends.

CDK has also defamed Cox by telling various Cox business partners, such as Nissan Motor Acceptance Corp. and American Honda Finance Corp., that Cox created deficiencies in data integration between Dealertrack’s sales and F&I tools and CDK’s DMS, the complaint said. A CDK presentation, however, revealed that CDK restricts Dealertrack’s access to certain dealership data to prolong deficiencies to give CDK’s competing product an advantage.

“The damage to the automotive industry has been immense,” the Cox’s complaint said. “Cox Automotive brings this action to recover those damages, enjoin CDK’s illegal conduct, and stave off further harm to vendors, dealers, and other participants in the automotive industry. The industry and market can no longer endure such abuses.”

Let’s block ads! (Why?)

Automotive News Breaking News Feed

Share This:

Leave a Reply