Authenticom wins court injunction against CDK

Authenticom Wins Court Injunction Against CDK – Full Story

by · July 12, 2017

Information is power – it’s a truism we all know. But in the 21st Century, access to information is where the real power lies. This point has been illustrated with crystal clarity in the recent CDK / Reynolds & Reynolds lawsuit brought by Authenticom. The public fight between these companies is finally getting its day in court and the first round has made headlines throughout the auto industry.

CDK and Reynolds & Reynolds handle the vast majority of the data management software sales for the auto industry. CDK alone boasts more than 27,000 retail client locations and is the primary provider of data management systems (DMS) to most of the top US dealer groups.

Reynolds also represents a large portion of the market and bundles DMS solutions with consulting, training and management systems for the entire dealership. Both companies also offer data integration, the combining of separate data to present one, unified view. Simply put, the two companies represent the lion’s share of the data available in the auto marketplace.

When you’re dealing with that much information, you’re also talking about a lot of power.

CDK / Reynolds & Reynolds – The Story

The story begins back in the early 2000s. At that time, the data management system market was developing – and flourishing. Both CDK and Reynolds had come out publicly supporting the idea that data belonged to the dealers.

At the time, Reynolds emphatically stated “The data belongs to the dealers. We all agree on that.” CDK agreed and said they had “always understood that dealerships own their data and enjoy having choices on how best to share and utilize that data with others.”

This inclusive and open environment allowed the data integration market to flourish. With more than a dozen providers offering data integration services, the competition kept prices competitive while fostering plenty of innovation in terms of user-friendly software.

But all that began to change in 2007, when Reynolds and Reynolds was acquired by Bob Brockman. At the time, Brockman was the owner Universal Computer Systems, a company he founded in 1970. Over three decades he built the company up to become a heavy hitter in the world of automotive services. When he headed up the acquisition of Reynolds and Reynolds, people expected a change – and Brockman delivered.

Almost immediately, Reynolds began restricting who could access the data their system had. Other data integrators found themselves with their credentials yanked and a wall built between them and the data they needed to deliver results to their own clients. It was a complete about face from the position of Reynolds just a few years ago, and the dawn of a new age when it came to data integration.

In a somewhat niche field like the automotive industry, the actions of Reynolds and Reynolds effectively cut off nearly half of the available data to other integration service providers. Over the next few years, this tug of war over access to information effectively killed off much of the competition.

But even as Reynolds was limiting the flow of data, they were placing a higher premium on the data they alone could provide. Fees to access their data climbed to almost staggering numbers, with some dealerships coughing up $150,000 or more every year simply to access and manage their data.

Meanwhile, their stranglehold was about to become even stronger. While the number of players was dwindling in the field, Reynolds clearly wanted to narrow things even further. According to the story laid out in Authenticom’s Complaint, in February of 2015 Reynolds and Reynolds reached out to CDK to strike a deal.

The two teamed up to freeze out everyone else. They would attack, undermine and thwart the efforts of everyone else in the market, ultimately leaving the two companies to reap the full rewards of a niche – but lucrative – market. Not only would this plan leave the entire market theirs for the taking, it would allow them to set any price they wanted. They would control ALL of the information – meaning they could charge whatever they wanted for it and dealerships would have to fall in line.

Since then, the companies have controlled the data integration system world with an iron fist. It became the Nasty Little Secret everyone knew about. As companies fell by the wayside, turning their focus to another area of service or simply going under, the pressure was turned up on the competitors that remained.

A Problem (Not Just) for Authenticom

One such competitor was Authenticom, headed up by President and CEO Steve Cottrell. Cottrell was another well-known player in the automotive data industry. With more than three decades of experience in the industry, he had spent 15 years building Authenticom into an impressive and well-respected company.

During that time he managed to grow their revenue from $3.7 million to $20 million in under 5 years. In 2015, the company was saluted by President Obama as “one of America’s own fastest-growing private companies”, so his efforts were clearly paying off.

Until, he says, CDK and Reynolds decided there wasn’t enough room for all of them. Authenticom, like other rivals, felt the pinch of CDK and Reynolds’ attempts to prevent data integration companies from accessing their data.

Then, Cottrell says, CDK offered to buy him out. They came in with an offer of $15 million – laughably low considering Authenticom’s track record. When Cottrell turned the offer down, CDK’s Vice President of Product Management at the time, Dan McCray, got involved.

According to Authenticom’s Complaint, McCray asked Cottrell to “take a walk” during an industry convention in 2016. Once alone McCray began talking about the offer Cottrell had turned down, urging him to reconsider and reminding him that his company’s “book of Reynolds business is worthless to us because of the agreement between CDK and Reynolds.”

When Cottrell was unmoved, McCray allegedly got nasty telling Cottrell “For god’s sake, you have built a great little business, get something for it before it is destroyed otherwise I will f***ing destroy it.”

Less than a Month later, Authenticom filed their 96-page Complaint.

Since then, the fight between CDK, Reynolds and their competitors has become increasingly public. Authenticom’s complaint is full of allegations that paint CDK and Reynolds executives as shrewd and calculating at best, deceptive and aggressive at worst. The fight to control automotive data has pitted not only competitors in the field against each other, but it’s brought dealerships into the fray.

These days, CDK and Reynolds insist the data stored with them is theirs – and theirs alone – and only they can decide what happens to it and who has access to it. The companies have blocked Authenticom’s access to data repeatedly essentially plunging any dealerships working with Authenticom into digital darkness.

Over the space of two years, the relentlessly aggressive pursuit of Authenticom has driven the company nearly out of business. The same company that was once hailed for three consecutive years of record-breaking growth is now close to bankruptcy and, by their own account, on the “verge of collapse”.

Customers who are forced to leave Authenticom and work with CDK and Reynolds have voiced their concerns over and over, but to no avail. One customer who was forced to migrate his data platform simply so he could do business confirmed his choice to leave Authenticom was “solely the result of CDK’s aggressive and recurring disablement of our data access credentials” and went on to add, “being forced to do business with CDK is distressing.”

If information is power and power corrupts then it’s no surprise that two of the titans in the world of DMS would eventually try and crush the competition. But when it comes to data integration, the real power still lies with the data itself.

This lawsuit focuses on questions over duopolies and anti-trust laws, but it has prompted a bigger conversation in the auto industry and beyond.

Who owns your data?

For years, dealers were assured their data was their own and they could control who was able to access it, no matter what integration platform they chose to work with. The arrangement between CDK and Reynolds did more than try to freeze out the competition – it changed the way dealers see their data.

Is the data they use and access really theirs or is it something a DMS company can restrict or cut-off access to depending on their mood? Will the auto industry be ruled by two companies who have already proven they’re willing to go to almost any lengths to lock down a market?

All this remains to be seen, but the court has already granted Authenticom’s request for an injunction against CDK and Reynolds, a decision both companies have vowed to appeal. In the meantime, Cottrell is waiting for his day in court – in front of a jury – to lay out his story and have them decide not only who’s right or wrong – but the future of his company.




Ryan is a creative, resourceful, and resilient B2B sales and marketing technologist who works with people and businesses on a variety of levels to help elevate their game, their brand, and their businesses. Text ‘autoconversion’ to 555888 to opt in and receive text communications from Ryan @ AutoConversion.

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