Dealership management system giants CDK Global Inc. and Reynolds and Reynolds Co. have roused dealerships and third-party vendors in recent years by charging vendors a hefty certification fee for access to data.
Motor Vehicle Software Corp., an electronic vehicle registration and titling vendor, has elevated the controversy by filing an antitrust lawsuit against the two companies and Computerized Vehicle Registration Inc., their jointly owned registration and titling company.
The complaint, filed Feb. 3 in federal court in Los Angeles, says that CDK and Reynolds are illegally blocking Motor Vehicle Software from joining their data access programs, which would grant it access to data from dealership management systems, in order to protect Computerized Vehicle Registration from competition.
In separate statements, both CDK and Reynolds declined to comment in detail on pending litigation but said that Motor Vehicle Software elected not to participate in their third-party access programs.
In the past, CDK and Reynolds have defended their practice of certifying, at a cost, outside software companies that want to have access to data in their dealership management systems as being necessary to maintain the security of highly confidential consumer data.
Brueggemann: We want “a level playing field.”
“All we ask is for a level playing field and a healthy market,” John Brueggemann, chief strategy officer for Motor Vehicle Software, told Automotive News. “We simply want to be able to participate like any other vendor and not be deliberately excluded based on the fact that they have a competing product.”
The lawsuit reflects the “tip of the iceberg” of dealer complaints, said Brian Maas, president of the California New Car Dealers Association. DMS integration and security fees for dealers and vendors have increased, and vendors have encountered hurdles accessing dealerships’ networks.
“The suspicion is CDK and Reynolds are increasing pricing for competitors,” Maas said. “That’s obviously concerning the dealers.”
Dealers “want to be able to choose any vendor they want, and fundamentally, the data in a DMS is the dealer’s data, not the DMS’ data,” Maas said.
The complaint alleges that Computerized Vehicle Registration has a monopoly over the Illinois electronic vehicle registration market and is trying to monopolize the California market.
Don Armstrong, Motor Vehicle Software’s CEO, said in a statement that the company has made “every effort” to join CDK’s and Reynolds’ third-party access programs but repeatedly has been turned away.
Each time the company has applied to participate in CDK’s Third-Party Access program or the Reynolds Certified Interface, the DMS providers have denied its request or demanded an excessive fee — as high as 33 percent of Motor Vehicle Software’s revenue — that could significantly hurt its business, the complaint says.
Armstrong: We were turned away repeatedly.
Top executives decided to block Motor Vehicle Software, the complaint says, including Scott Herbers, CDK’s vice president of sales for North America; Robert Karp, president of CDK North America; and Robert Schaefer, director of data services at Reynolds.
In July 2014, the complaint says, a small committee at CDK approved Motor Vehicle Software into the Third-Party Access program, but Herbers and Karp overruled the decision. CDK told Motor Vehicle Software that because it was a competitor to Computerized Vehicle Registration, it was unlikely that Motor Vehicle Software would ever be approved.
Last May, Dan McCray, vice president of product management at CDK, told Motor Vehicle Software that even if vendors have products that compete with companies owned by CDK, they would be able to integrate with the DMS. He also said that Motor Vehicle Software would be asked to pay the standardized price if it wanted to participate.
Later that month, McCray told Motor Vehicle Software: “I learned a lot since we last talked. I see this is not going to be [an] easy decision,” the complaint says.
CDK privately told Motor Vehicle Software that its standardized pricing does not apply to Motor Vehicle Software because it competes with Computerized Vehicle Registration, according to the complaint. An unnamed Computerized Vehicle Registration executive also said that price quotes they gave Motor Vehicle Software were designed as an effective refusal to deal. He told Motor Vehicle Software: “I wish we would have asked for 85 percent of your revenue. We don’t want you in the program,” the complaint says.
Computerized Vehicle Registration has 95 percent of the Illinois market, where real-time access to a DMS is a prerequisite because the state requires that a dealership provide the registration and license plates to the car buyer at the time of sale.
In California, though, a car buyer is not required to receive the registration and license plates at the time of sale. Motor Vehicle Software was able to obtain the DMS data though companies that provided intermediary access to a dealership’s DMS or from reports those dealerships sent to Motor Vehicle Software. CDK and Reynolds now deny intermediary access and tell dealers that if they send Motor Vehicle Software the information necessary to complete vehicle registration and titling they will be in breach of the DMS contract, the complaint said.
CDK and Reynolds’ behavior violates federal and state antitrust laws, the California Unfair Competition Law and the Illinois Consumer Fraud and Deceptive Business Practices Act, the complaint says.
Through the lawsuit, Motor Vehicle Software is seeking a permanent injunction barring CDK and Reynolds from “continuing unlawful conducts” and an injunction allowing Motor Vehicle Software to participate in CDK’s and Reynolds’ third-party access programs “on reasonable, non-discriminatory terms,” the statement said.
CDK, Reynolds respond
David Webster, a spokesman for CDK, of Hoffman Estates, Ill., told Automotive News in an email that Motor Vehicle Software’s claims are “unfounded and highly misleading.”
Motor Vehicle Software “was offered access to our systems in a way that protects our customers’ data and the security of our system. The terms we offered them were equal to or better than other [electronic vehicle registration applications] which have access to CDK’s systems, but they have refused to reach an agreement,” he said. “We will not compromise the integrity of our systems or the security of our customers’ data, and we intend to defend our rights vigorously against this meritless lawsuit.”
Reynolds spokesman Tom Schwartz said the Dayton, Ohio, company will allow any third-party vendor to join the Reynolds Certified Interface “on terms consistent with other similarly integrated applications.” He said other electronic vehicle registration applications are part of that certified program.
“We’re disappointed that MVSC has elected not to participate in the RCI program. We would very much like to have them in the program,” Schwartz said. “Instead, MVSC has decided to take this other action and that, too, is disappointing.”
Vince Bond Jr. contributed to this report.