A Second Antitrust Lawsuit Filed Against CDK & Reynolds

A Second Antitrust Lawsuit Filed Against CDK & Reynolds

May 2, 2017 — Authenticom, a firm providing data integration services to car dealers, filed a lawsuit late yesterday against CDK Global and Reynolds and Reynolds alleging the two companies engaged in antitrust practices. The suit could have far-reaching implications — not only on the companies involved, but also on the entire automotive retail space. It’s another chapter in what has become an intense battle of data access in the industry.

It’s the second such lawsuit filed against CDK and Reynolds this year. In February, electronic vehicle registration firm Motor Vehicle Software Corporation (MVSC), sued Reynolds, CDK and their joint venture Computerized Vehicle Registration Inc. (CVR) for antitrust violations. (Read more about the lawsuit here: CDK, Reynolds and Reynolds Sued for Alleged Antitrust Practices).

According to the complaint filed yesterday, Authenticom alleges Reynolds and Reynolds and CDK violated Sections One and Two of the Sherman Act when they conspired to put it out of business while creating a monopoly in the data integration business. Over the last few years, CDK and Reynolds have succeeded in forcing numerous other data integration vendors out of the market, according to the complaint.

On the surface, the lawsuit is a singular battle between Authenticom and the defendants. And it is a battle for survival for Anthenticom, which is the last independent data integration provider remaining in the auto retail space.

But the effects on the entire automotive industry if either of the two plaintiffs are successful in their lawsuits would be far reaching. And in some ways, the defendants are also fighting for their future. Hundreds of millions — if not billions of dollars could be at stake.

Reynolds and Reynolds and CDK Global control approximately 70% to 75% of the dealer management system (DMS) space. Access to dealerships’ customer data on the DMS systems is the issue. Vendors that provide services to car dealers need access to that data to successfully provide those services. Authenticom and similar firms, provide integration services to vendors and dealers — essentially, the smooth and seamless pushing and pulling data into and out of the DMS.

In recent years, though, Reynolds and CDK have established programs that control access to that data. Both companies cite cybersecurity as the reason for their policies — Reynolds Certified Interface (RCI) and Third Party Access (3PA) for CDK.

But both programs reportedly have become significant revenue streams as both Reynolds and CDK have increased prices they charge vendors for integration. Meanwhile, vendors have begun to pass many of those charges down to their dealer customers.

Authenticom is being represented by Washington D.C.-based law firm Kellogg, Hansen, Todd, Figel & Frederick — the same firm representing MVSC in the first lawsuit. The firm has won the two largest antitrust settlements in history, both at more than $1 billion. It is considered by many to be one of the leading antitrust firms in the U.S. Neil Gorsuch, recently appointed to the U.S. Supreme Court was once a partner at the firm.

TBR is waiting for statements from Reynolds and Reynolds and CDK Global and will update the story as they come in.

We also will provide more analysis of the potential effects of the lawsuit later today. To read the lawsuit, click Authenticom_Antitrust_Rey_CDK.

For more TBR analysis of the data access controversy:

The Data Breach that Wasn’t

 Data Access Battle Goes Nuclear

Dealerships Key in Cyber Security Wars

CDK & Cox Sign Integration Agreement

 

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