Dealers sue Reynolds, second firm for allegedly violating Sherman Act

In an attempt at creating a class-action lawsuit, a Kansas auto dealer is suing Kettering-based Reynolds and Reynolds, with a second company, for allegedly partnering to push out competition in the dealers’ services market.

Kenny Thomas Enterprises, Inc. (doing business as Olathe Toyota, a Kansas dealership), on behalf of itself and other dealerships “similarly situated,” filed suit in Ohio federal court last week against Reynolds and CDK Global LLC, an Illinois company.

Both Reynolds and CDK offer auto dealerships software and business management products and services. Authenticom, based in La Crosse, Wisc., has charged those two companies in a separate, earlier lawsuit with forming an agreement to block it from accessing key dealership data, even when the dealers involved want to allow Authenticom access to that data.

Reynolds and CDK offer services and products related to management systems that hold all pertinent information in running an auto dealerships. Dealers say they often need to give third-party vendors access to those systems.

Essentially, Authenticom has charged Reynolds and CDK with working together — forming a “duopoly” — to keep it as a smaller competitor out of their systems and out of their markets.

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The new federal suit says Reynolds and CDK together control about 75 percent of that “dealer management systems” market.

Reynolds and CDK are defending themselves against the Authenticom lawsuit. Last year, publicly traded CDK acknowledged that the Federal Trade Commission has filed a civil investigative demand for documents relating to any agreements between itself and Reynolds. (Reynolds is a privately held company.)

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Additionally: Reynolds and CDK face a still-earlier lawsuit — this one filed by a Southern California company — that it entered into an “illegal conspiracy” to also block a smaller competitor from dealer data.

Kenny Thomas/Olathe is suing Reynolds and CDK for violating the Sherman Act, a landmark federal law from the late 19th century against attempts by businesses to form monopolies or taking concerted action to keep prices artificially high.

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Says the Olathe suit: “Having cornered the market for providing data integration services for their own (dealer management system) platforms, CDK and Reynolds began charging supracompetitive prices. Vendors that had been paying third-party integrators only $30 per month for data integration services started having to pay nearly $900 a month to Reynolds for the same service. CDK raised its data integration prices by between 300 and 800 percent.”

Their alleged duopoly has driven competitors from the DMS market, the new suit claims.

“At one time, over a dozen data integrators competed for vendors’ business. But no longer. Authenticom — one data integrator — for example, said that it is ‘insolvent and on the verge of collapse’ due to CDK and Reynolds’ exclusionary anticompetitive conduct.”

Kenny Thomas/Olathe is seeking relief, restitution and a jury trial.

A spokesman for Reynolds declined to comment.

“The claims in this lawsuit are meritless and amount to a rehashing of those already made in other cases,” said a spokeswoman for CDK, Roxanne Pipitone. “We remain committed to protecting our property rights and those of third parties on our systems and will mount a vigorous defense.”

Reynolds has about 1,300 employees working at its Miami Valley Research Park campus.

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