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Authenticom Granted Preliminary Injunction in CDK, Reynolds Lawsuit

July 18, 2017

By Tariq Kamal

A federal judge in Madison, Wis., has granted a preliminary injunction to allow Authenticom to continue to access dealer data from CDK and Reynolds and Reynolds DMS client dealerships. Photo courtesy Western District of Wisconsin
A federal judge in Madison, Wis., has granted a preliminary injunction to allow Authenticom to continue to access dealer data from CDK and Reynolds and Reynolds DMS client dealerships. Photo courtesy Western District of Wisconsin

MADISON, Wis. — Authenticom scored a tentative victory on Friday in its antitrust lawsuit against CDK Global and Reynolds and Reynolds. The data integration provider was granted a preliminary injunction that prevents the two software makers from blocking access to their DMS offerings while the case proceeds.

The order, signed by Judge James Peterson of the U.S. District Court for the Western District of Wisconsin, calls for all three parties to “agree on all terms of the injunction” or submit “competing proposals” by July 21, effectively creating a framework by which Authenticom can — with dealer authorization — continue to access data entered into CDK and Reynolds’ systems.

“The Court’s ruling today is an important step forward not only for Authenticom, but for the automotive industry as a whole. Authenticom can now meet the data integration needs of both dealers and vendors without the threat of Authenticom’s dealer-authorized data access being blocked,” said Steve Cottrell, Authenticom’s founder and chief executive, in a prepared statement. “We look forward to providing secure, cost-effective, and reliable data integration services to our existing and future customers, finally without the threat of being hindered by CDK’s and Reynolds’ anticompetitive conduct.”

Authenticom’s directors filed suit against CDK and Reynolds on May 1, claiming the data-security measures undertaken by the two DMS providers have threatened its survival by limiting access to data stored in their DMS offerings and may be a violation of the federal anti-monopoly Sherman Act.

Describing the case as “complicated, both legally and factually,” Judge Peterson’s order states, in part, “Authenticom’s evidence establishes at least a moderate chance of success in proving that defendants have violated the Sherman Act. And the balance of harms tips sharply in favor of Authenticom, because Authenticom is clearly at risk of going under without a preliminary injunction.”

In separate statements, CDK and Reynolds executives expressed disappointment in the ruling. In an email to F&I and Showroom, Reynolds and Reynolds spokesman Tom Schwartz said the company plans to appeal the court’s final injunction once it is issued.

Making reference to the testimony of Eric Rosenbach, former head of cybersecurity efforts for the U.S. Department of Defense, Schwartz said Rosenbach and Reynolds’ directors agree the company’s policies are designed to “protect the operational integrity and security of its DMS” on behalf of its dealer clients.

“Reynolds continues to believe that unauthorized access to its DMS is unlawful and Reynolds intends to file counterclaims in the litigation to that effect,” Schwartz said.

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