Authenticom, a data integration service provider, received a preliminary injunction Friday in the company's antitrust lawsuit against dealership management system giants CDK Global Inc. and Reynolds and Reynolds Co.
Authenticom had sought the injunction to prevent practices by the two companies from effectively putting it out of business while the lawsuit proceeded.
The order, filed in the U.S. District Court for the Western District of Wisconsin, said Authenticom had "at least a moderate chance of success in proving that defendants have violated the Sherman Act," which prohibits harmful anticompetitive behavior and monopolization.
"The balance of harms tips sharply in favor of Authenticom, because Authenticom is clearly at risk of going under without a preliminary injunction," the order said.
As previously reported, the lawsuit accuses CDK and Reynolds of putting Authenticom in jeopardy by blocking the vendor out of databases crucial to its business and aiming to create a duopoly in the dealership data integration market.
District Judge James Peterson ordered the three parties "to confer and to submit an agreed proposed form of injunction to the court by July 21," which would lay out terms under which Authenticom could continue accessing dealer data from CDK's and Reynolds' dealership management systems during the litigation. "If the parties cannot agree on all terms of the injunction, they should set out their competing proposals," he wrote.
CDK's and Reynolds' arguments that Authenticom threatens the security of their information systems "is not persuasive because defendants already allow third-party access of the sort," and there is no evidence that Authenticom had insufficient security practices, the order said.
"The Court's ruling today is an important step forward not only for Authenticom, but for the automotive industry as a whole. Authenticom can now meet the data integration needs of both dealers and vendors without the threat of Authenticom's dealer-authorized data access being blocked," Authenticom CEO Steve Cottrell said in a statement. "We look forward to providing secure, cost-effective, and reliable data integration services to our existing and future customers, finally without the threat of being hindered by CDK's and Reynolds' anticompetitive conduct."
Authenticom declined to comment beyond its statement.
Reynolds spokesman Tom Schwartz and a CDK spokesman said separately that the companies are disappointed by the ruling. The CDK spokesman also noted that this is only a preliminary injunction.
"We will continue to defend ourselves vigorously against Authenticom's complaint in the main proceedings which remain underway," he said. "We strongly believe that our policy of not allowing unauthorized intermediaries onto our systems is the best way to preserve the integrity of those systems and the security of our customers' data."
Plans to appeal
Schwartz said Reynolds plans to appeal "any injunction once it's issued."
"As Eric Rosenbach, the former head of the U.S. Department of Defense's cybersecurity efforts made clear at the hearing, Reynolds's longstanding policies to protect the operational integrity and security of its DMS for its dealership customers are prudent and impressive," he said. "Reynolds continues to believe that unauthorized access to its DMS is unlawful and Reynolds intends to file counterclaims in the litigation to that effect."
Authenticom provided integration services for more than 15,000 dealerships and hundreds of vendors. Together, CDK and Reynolds help facilitate 90 percent of vehicle transactions, the Authenticom complaint said.
CDK and Reynolds have aggravated dealerships and third-party vendors in recent years by charging vendors high certification fees for access to dealerships' data. The companies have said separately that the fees are necessary to pay for cybersecurity measures.
CDK and Reynolds formed a written agreement to no longer compete with each other's data integration services and to block competitors from accessing dealership data on their respective DMS platforms, according to Authenticom's suit. The companies' 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 complaint said.