A Chicago federal judge will allow a group of software developers to continue their class action accusing vendors of violating antitrust laws.
“This antitrust multidistrict litigation revolves around the back-end software essential for managing operations at our nation’s car dealerships,” according to a July 22 opinion from U.S. District Judge Rebecca Pallmeyer. She said AutoLoop, “on behalf of hundreds of automotive software application vendors,” sued CDK Global and Reynolds, alleging the companies restricted access to their data systems in order to drive up prices for a subset of services.
Pallmeyer overruled the defendants’ challenges to AutoLoop expert Mark Israel and agreed to certify a class of software vendor plaintiffs.
According to court background, CDK and Reynolds control about 70% of the U.S. retail auto market for dealer management systems. Third-party developers can sell software to supplement those systems, but AutoLoop said that process requires access to usable data stored on dealers’ networks and accused CDK and Reynolds of hatching a September 2013 scheme to effectively squeeze from the market independent companies that convert raw dealer data into files developers could use to create commercially viable software.
The class action further alleged a February 2015 series of written agreements that “effectively memorialized the quid pro quo arrangement,” according to Pallmeyer’s summary, with each company agreeing to provide reciprocal access to internal data integration programs and cutting out independent data integrators, effectively forcing developers to buy that service from either CDK or Reynolds.
In seeking to strike Israel’s testimony, the defendants challenged his model for quantifying how much of a change in industry pricing the plaintiffs could attribute to the conduct they alleged and assertions about whether all vendors realized equal effects of the purported conspiracy. Pallmeyer said although she had already made rulings regarding Israel’s positions, she had not yet addressed the defendants’ expert economist, Laila Haider.
“The experts — each relying on economic principles and data from this case — have offered competing theories for when the appropriate cutoff date is for damages calculations,” Pallmeyer wrote. “The difference in opinion here is not a basis to exclude Dr. Israel’s testimony; rather, it represents one of the many battles over which the experts will confront each other during trial.”
Regarding class certification, Pallmeyer said the plaintiffs met legal standards to make their case a class action, and also agreed AutoLoop is an adequate representative. She noted the defendant companies failed to mount a convincing challenge.
“Proceeding as an individual plaintiff at summary judgment, AutoLoop has already shown that the record evidence is sufficient to create a triable issue for each of the elements of its Sherman Act claim,” Pallmeyer wrote. “Now, at the class certification stage, the question becomes whether AutoLoop can show that this evidence is common to the class.”
Pallmeyer further noted the allegations of conspiracy are central to the antitrust claims and said AutoLoop argued its common evidence would apply to any potential class member, but CDK and Reynolds focused “exclusively on arguing that individual issues related to the antitrust injury element predominate over common questions in this case.”
The crux of that argument, she continued, is an assertion some vendors suffered no legal injury. But the defendants took that position by asserting the only possible harm was paying above-market rates, whereas AutoLoop alleged other damages, like being deprived of choices and therefore being unable to access either lower costing or better quality options for data integration services, or being forced into a market where CDK and Reynolds didn’t have incentives to innovate or enhance their products.
Ultimately, Pallmeyer said, the parties’ “sparring on antitrust injury largely ignores the relatively narrow inquiry the court must decide: is it possible for the vendors to prove injury with evidence that is common to the class? The vendors have proven that they can. … Dr. Israel provides economic evidence of classwide price overcharges and quantifies this injury with his regression analyses. And, Dr. Haider’s attempt to undermine Dr. Israel’s antitrust injury conclusions related to overcharge by attacking his damages model is misplaced.”
The defendants also argued that, should Pallmeyer certify a class, she should at least shorten the proposed period, which AutoLoop wanted to cover all purchases of data integration systems starting Oct. 1, 2013. Pallmeyer rejected the argument that a Reynolds settlement with indirect purchaser plaintiffs in October 2018 should be the bookend of the class window, saying the defendants should have raised that issue during summary judgment proceedings.
Pallmeyer also rejected a suggested cutoff of December 2019, when AutoLoop submitted its initial merits expert reports. She said Israel’s data “shows continued overcharges over the latter five years of the proposed class period” and noted the defendants can still challenge the timeline during a trial.
The judge also recommended the federal Judicial Panel on Multidistrict Litigation send the case to federal court in Madison, Wisconsin, for trial.
CDK did not respond to a request for comment.