Did Carfax defame Experian to retain business? Judge tosses some claims
The high-stakes battle between Experian Information Solutions Inc. and Carfax Inc. for market share in the vehicle-history report arena has spilled over into a Chicago courthouse.
That's where Carfax is defending itself against Experian's allegations that Carfax defamed Experian and wrongfully interfered with Experian's effort to persuade Subaru to switch dealers to Experian's AutoCheck reports and dump Carfax reports.
The companies compete to produce vehicle-history reports for manufacturers' certified used vehicle programs.
It's not the first time Experian and Carfax have scrapped in court. In 2010 Carfax sued Experian in New York, alleging unfair business practices, unfair competition and false advertising. That case, which stemmed from Experian's 2009 "Carfax vs. AutoCheck" advertising campaign, was voluntarily dropped. However, advertising-related allegations appear in Experian's counterclaims in the Chicago case.
The Chicago litigation is in its early stages, but U.S. District Judge Edmond Chang this month dismissed some of Experian's defamation claims against Carfax, slightly narrowing the lawsuit. Other defamation allegations remain active, as do allegations of tortuous interference and business disparagement.
Here's what led up to Experian suing Carfax, according to Chang's decision:
In October, a few months before Carfax's exclusive contract with Subaru of America was up for renewal in February, Experian negotiated an alternative deal with Subaru.
"Carfax did not give up easily," though, the decision notes, and its officials "visited Subaru and attempted (but failed) to persuade Subaru to renew their contract."
In addition, Carfax sent Subaru a letter "intended to dissuade" Subaru from signing up with Experian. A week later, Subaru notified Experian that it was "putting the brakes" on its switch to Experian. Subaru then surveyed its dealers and, in November, renewed its Carfax contract.
In response, Experian headed to court, blaming Carfax for scotching a deal with Subaru worth more than $2.3 million. Carfax, in turn, asked Chang to dismiss Experian's allegations that some statements in Carfax's letter to Subaru were defamatory.
In his decision, Chang let stand a defamation claim based on statements in the letter that "AutoCheck's auction frame data is highly flawed," that "using AutoCheck will allow a significant number of problem vehicles into [Subaru's] program," and that "there is a good chance AutoCheck will miss a problem vehicle, if this happens, there is a significant probability the consumer will see the problem on the Carfax report. This could cause problems (happened to Nissan this year)."
Those statements, Chang held, could be proved libelous because they are factual assertions rather than mere opinions.
However, he said several other statements in Carfax's letter can't be libelous, including a charge that Experian lacks "strong brand characteristics," offered "more favorable pricing terms to other dealers than it did to Subaru," and pursued dealer advisory board members "to rabble rouse and stir up discontent in an attempt to undermine Carfax's integrity."
Steve Blumenthal, Carfax's general counsel, declined to comment on the case beyond saying: "We believe Experian's claims are without merit and we will vigorously defend ourselves against them."
Carfax was more outspoken in its court filings, though, calling Experian's lawsuit "not only baseless but retaliatory" because Carfax had "called Experian to task for its deceptive advertising practices."
Experian spokeswoman Roslyn Whitehurst said it is corporate policy not to comment on pending litigation.
You can reach Eric Freedman at email@example.com.