Authenticom, a data integration service provider, on Monday filed an antitrust lawsuit against dealership management system giants CDK Global Inc. and Reynolds and Reynolds Co.
The lawsuit accuses the two of creating a duopoly in the dealership data integration market, locking the vendor out of databases necessary to its business and threatening its survival.
Authenticom’s filing was similar to an amended complaint Tuesday by electronic vehicle registration and titling vendor Motor Vehicle Software Corp., which had previously sued the two companies. Both of the new filings said CDK and Reynolds agreed to no longer compete with each other’s data integration services and to block competitors from accessing dealership data on their respective DMS platforms.
Data integration service providers such as Authenticom make dealerships’ data usable for specific vendor services. “Vendors depend on and cannot provide their services without access to a dealer’s data,” Authenticom’s complaint said.
Authenticom provided integration services for more than 15,000 dealerships and hundreds of vendors. Now, Authenticom “is insolvent and on the verge of collapse,” the complaint said.
Authenticom’s complaint, filed May 1 in the U.S. District Court for the Western District of Wisconsin, says CDK and Reynolds have violated antitrust law by colluding to create a duopoly of data integration services.
Together, CDK and Reynolds help facilitate 90 percent of vehicle transactions, the Authenticom complaint said.
CDK and Reynolds have provoked dealerships and third-party vendors in recent years by charging vendors a hefty certification fee for access to dealerships’ data. The two companies have said separately that the fees are necessary to pay for adequate cybersecurity measures.
A CDK spokesperson declined to comment on the case, other than to call Authenticom’s complaint “meritless” in an email to Automotive News. A Reynolds spokesperson did not have immediate comment.
Dividing the market
For more than a decade, CDK used data from Reynolds’ dealership management systems to provide data integration services to CDK customers on Reynolds’ system.
In February 2015, CDK and Reynolds agreed that they would no longer compete in the dealership data integration market, according to the filing. Under the written agreement, CDK and Reynolds would be the exclusive data integration providers for data on their respective DMS platforms, the complaints said.
Separately, in February Motor Vehicle Software filed an antitrust lawsuit against CDK and Reynolds and Computerized Vehicle Registration Inc., their jointly owned registration and titling company. The complaint said 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.
“The agreement to divide the market is inherently a violation of antitrust law,” John Brueggeman, chief strategy officer for MVSC, said Tuesday.
CDK and Reynolds’ written agreement gives clear evidence of collusion and anticompetitive behavior, he said. “This absolutely strengthens our case.”
CDK and Reynolds’ motive for the exclusive data integration agreement was to prevent vendors from using competing data integration providers and push them to become members of Reynolds’ and CDK’s third-party access programs, Authenticom’s mplaint said.
In April 2016, Dan McCray, then CDK’s vice president of product management, told Authenticom CEO Steve Cottrell about CDK’s agreement with Reynolds, according to Authenticom’s complaint. McCray referenced a previous offer by CDK to buy Authenticom for $15 million, and said that the offer was low because Authenticom’s business affiliated with Reynolds would be worthless to CDK, McCray said.
He said he was mandated to destroy Authenticom’s business and told Cottrell to get something for the “great little business” he had built; otherwise, CDK would destroy it, according to court documents. Executives from Reynolds relayed a similar message, the complaint said.
After they agreed to stop competing with each other, CDK and Reynolds agreed to block other data integrators, such as Authenticom, from accessing dealer data, which would kill those data integrators’ business, the plaintiffs’ court filings said.
Superior Integrated Solutions Inc., for example, worked with thousands of dealerships on data integration. Reynolds sued Superior, claiming dealerships which gave the company access to their data were in breach of their DMS contracts. Superior Integrated Solutions settled and halted its integration business with dealers using the Reynolds DMS, according to court documents. CDK also threatened to block the company from its DMS, and Superior shut down integration services for dealerships using CDK’s DMS, the Authenticom complaint said.
SelectQu, owned by Dominion Enterprises, also left the dealership data integration market. For Dominion, which owns several vendors, to be approved into CDK and Reynolds’ certification programs, the company had to agree that SelectQu would no longer pull data from CDK and Reynolds’ DMS, the Authenticom complaint said. SelectQu left the market as a result, the complaint said.
Dominion declined to comment.
Authenticom cited three other examples of what it called anticompetitive behavior by the two industry giants in its complaint but noted that there are more.
“In short,” the complaint said, “CDK and Reynolds have succeeded in eliminating virtually all competition in the data integration market for dealers using the CDK and Reynolds DMS platforms, and have now targeted Authenticom, their only remaining competitor.”
Vince Bond contributed to this report.