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BREAKING: Cox Files Lawsuit Against CDK

December 13, 2017 0 Comments

Cox Automotive on Monday filed an 11-count lawsuit against CDK Global, Inc., alleging anticompetitive business practices.

The lawsuit, filed in the U.S. District Court for the Western District of Wisconsin, focuses on alleged anti-competitive behavior by CDK. The court documents are unclear as to how much Cox is seeking in damages, but the filings 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 email 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 spokesman for CDK said the company does not comment in detail on litigation matters.

On Cox’s website, the company said it filed the lawsuit and even provided a link to the suit.

The complaint claims CDK and Reynolds & Reynolds, labelled a “co-conspirator” by Cox, though not named as a party in the suit, colluded to eliminate the competition in dealership data integration:

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. 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.

The suit contend that vendors under Cox Automotive were directly affected by the alleged collusion because “Cox’s products and services compete with those offered by CDK and Reynolds.”

According to the complaint, CDK and Reynolds were trying to diminish the competition in the data integration services market, as well as “seeking to impair and destroy competition for the products and services that vendors offer, and upon which dealers rely.”

Cox further alleges that CDK and Reynolds took control of dealerships’ data, saying the DMS giants “thwarted” dealerships’ ability to control access to data, as well as use that data, “with no lawful or legitimate purpose.”

The complaint goes on to claim that CDK and Reynolds were trying to eliminate competition and harm peers, reading, in part, “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.”

In addition to other counts, the lawsuit filed by Cox alleges 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.”

The CDK-Reynolds Agreement

This is not the first time that CDK and Reynolds have made headlines. Authenticom, a data integration service provider, filed a lawsuit against the pair earlier this year. On May 1, Authenticom cited a document from February 2015 showing that CDK and Reynolds “agreed that they would no longer compete in the dealership data integration market.”

Under the agreement, which protects the duopoly in the DMS market, CDK and Reynolds would “be the exclusive data integration providers for data on their respective DMS platforms.” As such, the agreement halts the natural progression of dealer operations to “efficient and less expensive vendor software solutions,” the complaint said, referencing the Authenticom suit. By eliminating competition, vendors are forced to pay “exorbitant fees” to access and use dealerships’ data.

Vendors which integrate Dealertrack’s DMS, a Cox product, pay $50 per rooftop per month per integration, compared to the “$250-$1,000 for vendors that integrate with CDK’s DMS.”

Fees are often passed on to dealerships, making Cox’s products less appealing than those offered by CDK and Reynolds without integration fees, the complaint said. It claims the two DMS companies “plotted to control data integration to restrict other vendors’ access and use of dealerships’ data.”

“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 restricts products from Cox’s Xtime from creating and modifying repair orders in DMS while allowing its own product, the Service Edge application, do just that. According to internal CDK documents, the company wants “to disrupt the workflow” by stopping Xtime’s products, giving Service Edge an advantage in the market.

 

Other Allegations

Cox claims that CDK breached its contract with Cox and engaged in “unfair trade practices and defamed” Cox.

CDK told Cox to enter a third-party access agreement for a fee, but allowed Reynolds to access the same services free of charge for five years. This violates California’s Unfair Trade Practices Act and breaches the contract between CDK and Cox, the lawsuit contends.

According to the complaint, CDK “defamed” Cox by telling various Cox business partners (e.g. 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.”

A CDK presentation revealed that CDK restricts Dealertrack’s access to certain dealership data in order to “prolong deficiencies,” giving CDK’s competing product an advantage.

“The damage to the automotive industry has been immense. 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,” said the complaint. “The industry and market can no longer endure such abuses.”

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