Wednesday, 22 May 2013 18:10

CARFAX Hit by $50M Federal Lawsuit Filed by 120 Automotive Dealerships

The owners of 120 auto dealerships have filed a federal lawsuit against Carfax Inc., alleging that the vehicle history reporting company engages in anti-competitive practices and violates antitrust laws.

The suit, filed in U.S. District Court for the Southern District of New York, seeks damages of more than $50 million. It also alleges that Carfax, through exclusive agreements with auto companies and popular classified auto Web sites, is “monopolist in the sale of vehicle history reports.”

Larry Gamache, a Carfax spokesman, said the company is “not able to comment” on the suit. Carfax is a unit of R. L. Polk & Co.

In an interview with media last December, Gamache said Carfax draws customers because it works hard to build its brand and deliver a quality product.

“We have to prove over and over again that the Carfax vehicle history report is the vehicle history report of excellence,” he said. “And if we don’t do that, our partners are free to choose alternatives.”

The Automotive News article was about how some dealers were angered by Carfax’s success as the dominant used-vehicle history reports provider.

The lawsuit’s plaintiffs include dealership owners from California to Vermont. Their attorney, Leonard Bellavia, a partner at Bellavia Blatt Andron & Crossett in Mineola, NY, says more plaintiffs are expected.

“I have about 25 or 50 more dealers that have sent paperwork expressing a desire to join the suit,” Bellavia says.

The lawsuit alleges that Carfax provides “cash or noncash marketing support” to auto manufacturers and to classified sites Autotrader.com and Cars.com as part of exclusive agreements that shut out its competitors. The suit also alleges that Carfax charges dealers “a significantly higher price” for its vehicle history reports than other providers charge.

Dealers typically pay $16.95 per report or a flat monthly fee for an unlimited number of reports per dealership location, the suit alleges. “The monthly fee ranges from $899 per dealership location for some dealers to $1,549 per dealership location for other dealers,” depending in the number of vehicles in the dealership’s inventory, according to the suit.

It alleges that Carfax forces dealers to buy its vehicle history reports as a result of its exclusive agreements with 37 of 40 manufacturer certified pre-owned programs. Virtually all of the agreements require dealers to provide Carfax reports as a condition of participating in the programs, the suit alleges.

Also at issue is that Carfax has exclusive agreements with Cars.com and AutoTrader.com. Those agreements stipulate that dealers who list used vehicles for sale on those sites can only post vehicle history reports from Carfax, according to the suit.

Ten firms are approved on the National Motor Vehicle Title Information System, a national data base of vehicle title information to which 41 states contribute, according to the U.S. Department of Justice Web site.

Carfax’s main competitor is AutoCheck, owned by Experian Automotive Inc.

Mentioned, but not a focal point of the suit, is the alleged inaccuracy found in some Carfax reports. Bellavia says that is a concern of dealers and can be cured as a byproduct of a “free marketplace.”

The lead plaintiff in the suit is Maxon Hyundai-Mazda in Union, NJ. Its dealer principal, Mike Ciasulli, who is allegedly furious with Carfax but subscribes to the reports as a condition of the Hyundai certified used-vehicle program in which he participates.

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