The dominant maker of software for franchise car dealers has fueled antitrust lawsuits in recent years like a windshield collects bugs in the summer.
The latest lawsuit against CDK Global alleges that the Austin, Texas-based company hindered the efforts of four Asbury Automotive dealers to migrate their data from CDK’s software to that of upstart Tekion Corp.
Pleasanton, California-based Tekion filed the 37-page complaint this week in the U.S. District Court for the Northern District of California, alleging that CDK violated the Sherman Antitrust Act and California’s unfair competition law.
The lawsuit seeks unspecified damages.
Tekion, founded in 2016 by former Tesla Chief Information Officer Jay Vijayan, is trying to crack a software market for dealer management systems, or DMS, that is known for its high barrier to entry.
Because DMS software powers virtually every aspect of dealer operations – from finance to inventory management – switching platforms is difficult and potentially disruptive.
Tekion said it views the pilot program with Asbury as a “can’t miss” prospect as Asbury is the nation’s fifth-largest dealer group with more than 150 stores representing 31 brands.
“The Asbury pilot program is critical to the future success of Tekion more broadly and serves as a high-profile proof of concept of Tekion’s technology,” the lawsuit said.
Earlier this year, a Georgia court ordered CDK to provide Tekion with records of the four Asbury dealers.
“CDK’s refusal to grant Asbury access to its own data thwarted Asbury’s pilot program with Tekion, delaying it until October 2024 and threatening to jeopardize the entire contract,” Tekion said in its complaint.
Tekion further claims that CDK’s anti-competitive behavior could leave dealers stranded with higher costs and denies their technical features. Tekion claims these are superior to CDK’s.
CDK released a statement ridiculing Tekion’s lawsuit.
“It is unfortunate that Tekion has resorted to using a legal filing as a marketing stunt in an attempt to circumvent contractual terms and industry practices, but we are confident that our industry will see this for what it really is,” said CDK .
“We consider the recently filed complaint to be low on substance and high on rhetoric,” CDK added. “We believe Tekion filed this in retaliation for a cease and desist letter that CDK sent to Tekion regarding unauthorized access to our systems that was detected by our security monitoring protocols.”
CDK said the DMS market has always been competitive, yet “we have facilitated sending and receiving data transfers for dealers and countless suppliers for years and will continue to do so.”
Tekion filed the lawsuit three days after CDK’s defamation letter was sent.
“Based on the evidence gathered to date, CDK has reason to believe that Tekion is involved in the ongoing violation of multiple state and federal laws that target Tekion’s illegal hacking and computer fraud, privacy, copyright infringement, misappropriation, unfair and
misleading commercial practices and unlawful interference with contracts,” CDK said in the letter.
Tekion said in response to CDK’s statement that it did not file its lawsuit lightly and believes its case is strong and necessary.
“CDK’s claims are baseless – there is nothing improper about a CDK customer having access to its own data, and the suggestion that we could have taken such a comprehensive, fact-intensive antitrust action within three days of CDK’s threats , is not credible,” Tekion said.
“Our legal action is intended to protect the automotive retail ecosystem from CDK’s anti-competitive practices and maintain fairness in competition.”
The pending lawsuit follows CDK’s agreement in August to pay $100 million to settle a class action lawsuit filed by dealers in 2018. The dealers alleged that CDK and Reynolds & Reynolds had illegally conspired to prevent other software companies from accessing their dealer clients’ DMS systems, thereby driving out these competitors. disappear from the industry and ultimately increase costs for dealers.
CDK admitted no wrongdoing in agreeing to the settlement. Reynolds previously settled for $29.5 million.
In 2018, the Federal Trade Commission raised antitrust concerns about CDK and filed an administrative complaint over its proposed acquisition of competitor Auto/Mate LLC.
“CDK concluded that it could eliminate a strong competitor that threatened to become an even more disruptive rival by simply acquiring the company,” the FTC said at the time.
Under pressure from the FTC, CDK canceled the acquisition less than a month later.
