Loop, LLC v. CDK Global, LLC (In re Dealer Mgmt. Sys. Antitrust Litig.)

Decision Date25 January 2019
Docket NumberCase No. 18-cv-864
Parties IN RE DEALER MANAGEMENT SYSTEMS ANTITRUST LITIGATION, MDL 2817 This Document Relates to: Loop, LLC, d/b/a Autoloop v. CDK Global, LLC, Case No. 18-cv-2521
CourtU.S. District Court — Northern District of Illinois
MEMORANDUM OPINION AND ORDER

Robert M. Dow, Jr., United States District Judge

Before the Court is Defendant CDK Global, LLC's motion to dismiss [259] the amended complaint filed by Plaintiff Loop, LLC. For the reasons set forth below, the motion is denied.

I. Background1

Plaintiff Loop, LLC ("AutoLoop" or "Plaintiff") brings this action on behalf of itself and other automotive software application vendors to remedy and enjoin purported ongoing antitrust and state law violations by Defendant CDK Global, LLC ("CDK" or "Defendant"). [194 (Am. Compl.), at ¶ 1.] Plaintiff alleges that CDK and its non-party co-conspirator The Reynolds and Reynolds Company ("Reynolds") have committed antitrust violations and inflicted widespread harm on automotive dealers, vendors of software products and services (like Plaintiff), and the automotive industry by conspiring to eliminate competition for providing data integration services for dealer data. [Id. at ¶ 2.] Plaintiff is an automotive software products and services company, providing integrated software solutions to more than 2,000 car dealers across the country. [Id. at ¶ 6.] Plaintiff offers three suites of software: sales, service, and marketing. [Id. at ¶ 7.] Each suite includes multiple software applications that dealers can select to enhance their ability to sell cars and serve customers. [Id. ] Vendors like Plaintiff need access to dealer data for their products and services to function. [Id. at ¶ 8.] This dealer data includes vehicle and parts inventory, customer name and contact information, customer leads, completed and pending sales information, vehicle financing and insurance ("F & I") information, vehicle pricing information, and service and repair information. [Id. ]

A. The DMS Market

Dealers traditionally have stored a significant portion of their data on a database within their data management system ("DMS"), which is software that dealers use to help manage their businesses (e.g. , accounting, sales, service, and human resources). [Id. at ¶ 9.] Defendant and non-party Reynolds both have significant market power in the DMS market. [Id. at ¶ 10.] Together, they control approximately 75% of the United States market by number of dealers and approximately 90% when measured by number of vehicles sold. [Id. ] Defendant controls approximately 45% of the DMS market, and Reynolds controls approximately 30%. [Id. ] Switching DMS providers presents significant logistical challenges and is highly disruptive to business operations. [Id. at ¶ 48.] It can take a dealership more than a year of preparation, staff training, and testing before a new DMS can be put into operation, resulting in significant training and implementation costs. [Id. ] The average DMS client tenure is more than 20 years. [Id. at 68.] Defendant's own CEO publicly has recognized that dealers are hesitant to switch DMSs because the process can take time and can be very difficult. [Id. at ¶ 49.]

In addition to their DMSs, Defendant and Reynolds offer standalone software applications that compete directly with applications offered by Plaintiff and other third-party vendors. [Id. at ¶ 11.] DMS providers (including Defendant and Reynolds) historically have allowed dealers to provide third parties (including vendors like Plaintiff) automated access to the dealer data stored on their DMSs through data integration service providers, which collect and standardize the data to provide it to the dealer's chosen third-party vendors. [Id. at ¶ 12.] Plaintiff sells automotive software products and services to dealers, including applications that help dealers market, sell, and service cars. [Id. at ¶¶ 6-7.] Plaintiff's applications, like those of other vendors, require access to dealer data stored on a dealers' DMSs. [Id. at ¶ 8.]

B. The Dealer Data Integration Market

The Data Integration Services ("DIS") market consists of services that provide access to dealer data on their respective DMSs. [Id. at ¶ 56.] Data integrators (i.e. , DIS providers) also may provide value-enhancing services, such as putting data from different DMSs in a uniform format, data hygiene (i.e. , error correction), and granular control by dealers over which vendors receive which data. [Id. ] Defendant and Reynolds each provide data integration services for their respective DMSs. [Id. at ¶ 13.] Defendant's data integration service is known as Third Party Access ("3PA"), and Reynolds's data integration service is known as the Reynolds Certified Interface ("RCI"). [Id. ] Third parties also have provided competing data integration services. [Id. ] Indeed, Defendant owns two such third-party data integrators—Digital Motorworks, Inc. ("DMI") and IntegraLink. [Id. ] Other third-party data integrators have included Authenticom, Inc. ("Authenticom") and Superior Integrated Solutions, Inc. ("SIS"). [Id. ] At one time, both CDK and Reynolds had "open" DMSs, meaning that neither took steps to prevent dealer clients from authorizing third-party access to the dealers' data. [Id. at ¶ 14.] During this time, the competition between data integration services made access to dealer data cost effective. For example, an application vendor could pay a data integrator $ 50 per dealer per month. [Id. ] With dealers in control of access to and use of their data, vendors created an array of innovative software products and services to help dealerships market, sell, lease, and service cars. [Id. ]

Over time, Reynolds began to "close" its DMS by selectively blocking third-party data integrators from accessing dealer data stored on the Reynolds DMS. [Id. at ¶ 15.] As Reynolds reduced competition for DIS through its blocking activities, Reynolds increased the fees it charged for data integration through RCI. [Id. ] Defendant continued to differentiate its product as an "open" DMS. [Id. ] At the same time, Defendant's own data integration businesses provided vendors with access to dealer data on the Reynolds DMS. [Id. ] Defendant's open-access policy allowed it to gain (albeit very slowly) DMS customers at Reynolds's expense and to enter long-term contracts with those dealers. [Id. ] Defendant marketed its "open" system directly to dealers and issued press releases stressing that it "believes in the fair competitive environment and does not use its leverage through supply of the dealer management system to reduce competition through the restriction of data access." [Id. at ¶ 86.]

C. Alleged Agreement

That competition between Defendant and Reynolds halted in early 2015 when Defendant began blocking dealers from granting third-party access to dealer data and, at the same time, agreed to shut down its data integration business for dealers using a Reynolds DMS. [Id. at ¶ 16.] Plaintiff alleges that these changes were the result of horizontal agreements with Reynolds. [Id .] Effective February 18, 2015, Defendant and Reynolds entered into three written agreements. [Id. at ¶ 96.] The centerpiece was a "Data Exchange Agreement"—also referred to as the "wind-down" agreement—pursuant to which Defendant agreed to wind down its data integration business on the Reynolds DMS, with Reynolds promising not to block Defendant's access to the Reynolds system during the wind-down period (approximately 5 years). [Id. ] During that period, Reynolds agreed that CDK could continue to extract dealer data just as it had before, using login credentials provided by the dealer. [Id. ] As for other independent integrators, Defendant and Reynolds agreed that they would not "take any steps to assist any person that it reasonably believes to have plans to access or integrate with the other party's DMS." [Id. ]

In addition to the written agreements, senior CDK and Reynolds executives also have admitted that they have agreed to restrict access to dealer data and destroy data integrators like Authenticom, Superior Integrated Solutions, Inc. ("SIS"), and others. [Id. at ¶ 103.] For example, on April 3, 2016, at an industry convention in Las Vegas, Dan McCray (CDK's former Vice President of Product Management) told Steve Cottrell (Authenticom's founder and CEO) that Defendant and Reynolds had agreed to lock Authenticom and other third parties out and that they were "working collaboratively to remove all hostile integrators from our DMS system." [Id. at ¶ 104.] By eliminating competition for data integration services, CDK and Reynolds have seized control over dealer data and thwarted dealers' ability to control access to and the usage of their data. [Id. at ¶ 3.] According to Plaintiff, as a result of these agreements, vendors like Plaintiff had no choice but to access dealer data through CDK's and Reynolds's own data integration services. Plaintiff's integration fees therefore have skyrocketed from approximately $ 79 per month per rooftop with independent data integrators to more than $ 730 per month per rooftop with Defendant. [Id. at ¶ 27.] Other vendors have seen similar increases. [Id. ]

D. Alleged Exclusive Dealing

Shortly after entering into the Data Exchange Agreement, Defendant began "renegotiating" its contracts with vendors for 3PA access. [Id. at ¶ 114.] Consistent with its decision to close its DMS, Defendant imposed contractual provisions requiring that vendors using 3PA for any of its dealer-customers on a CDK DMS agree to use 3PA exclusively for all of its of its dealer-customers on CDK DMSs. [Id. at ¶ 115.] For example, Plaintiff's Managed Interface Agreement ("MIA") and accompanying Statement of Work, dated January 12, 2016, states in Section 1(f):

[AutoLoop] agrees that it will not (a) otherwise access, retrieve, license, or otherwise transfer any data from or to an [sic] CDK System (including, without limitation, pursuant to any
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7 cases
  • In re Dealer Mgmt. Sys. Antitrust Litig.
    • United States
    • United States District Courts. 7th Circuit. United States District Court (Northern District of Illinois)
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    ...a plaintiff must allege that that defendant engaged in predatory or anticompetitive conduct." In re Dealer Management Systems Antitrust Litigation , 362 F.Supp.3d 477, 497–98 (N.D. Ill. 2019) (citing Mercatus Grp., LLC v. Lake Forest Hosp. , 641 F.3d 834, 854 (7th Cir. 2011) ). "Where defen......
  • In re Dealer Mgmt. Sys. Antitrust Litig.
    • United States
    • United States District Courts. 7th Circuit. United States District Court (Northern District of Illinois)
    • January 21, 2022
    ...1 ..., it is well established that it also violates Section 2 if it acquires or maintains a monopoly by means of that restraint of trade.” Id. at 498 (quoting Gumwood HP Shopping Partners, L.P. v Simon Prop. Grp., Inc., 2013 WL 3214983, at *7 (N.D. Ind. Mar. 13, 2013)). To recover under the......
  • In re Dealer Mgmt. Sys. Antitrust Litig.
    • United States
    • United States District Courts. 7th Circuit. United States District Court (Northern District of Illinois)
    • January 21, 2022
    ...1 ..., it is well established that it also violates Section 2 if it acquires or maintains a monopoly by means of that restraint of trade.” Id. at 498 (quoting Gumwood HP Shopping Partners, L.P. v Simon Prop. Grp., Inc., 2013 WL 3214983, at *7 (N.D. Ind. Mar. 13, 2013)). To recover under the......
  • In re Dealer Mgmt. Sys. Antitrust Litig.
    • United States
    • United States District Courts. 7th Circuit. United States District Court (Northern District of Illinois)
    • June 29, 2023
    ...... in these consolidated cases-Loop, LLC. (“AutoLoop”); a group of retail automobile. ... Defendants CDK Global", LLC (“CDK”) and the. Reynolds and Reynolds Company (“Reynolds\xE2"... greater detail below, this case originally included a fourth. plaintiff-Authenticom, Inc. ......
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