Recently, a dealer class action lawsuit was filed against The Reynolds and Reynolds Company (“R&R”) and CDK Global, LLC (“CDK”), alleging several violations of both Section 1 of the Sherman Act and the New Jersey Antitrust Act.
The lawsuit claims that R&R and CDK:
•Entered a horizonal agreement to reduce competition in the Data Management System (DMS) and Data Integration Services market. (The suit alleges the two companies control approximately 75% of the DMS market nationally.)•Imposed exclusive dealing provisions that were anticompetitive and harmed dealers who use their services.•Illegally tied the provision of data integration services to the purchase of the DMS.
A dealership’s DMS is critical to the company’s efficient operation. Dealerships use the DMS to run data for a variety of vital business needs, including accounting, payroll, insurance information, vehicle and parts inventory, customer information, completed and pending sales, vehicle financing, service, and more.
The lawsuit claims dealers were left with no choice but to enter into long-term contracts for the provision of DMS services and that R&R and CDK used their market dominance to impose artificially inflated fees for DMS services. According to the lawsuit, a single, small dealership pays up to $150,000 per year for a DMS software license, mid-size dealer groups (5-10 stores) pay $1.5 million or more per year and large dealerships can easily pay more than $5 million per year.
With regard to data integration services, the lawsuit claims the companies included unlawful exclusive dealing provisions in their contracts, which effectively required dealers to cede control of their own data and allowed R&R and CDK to block other data integration service providers from accessing dealership data.
The lawsuit was recently filed in U.S. District Court (New Jersey), but has not yet been certified as a Class Action. NJ CAR will continue monitoring this lawsuit and report any developments to members.