Antitrust Law Daily Wrap Up, ACQUISITIONS & MERGERS NEWS: Cox Automotive required to divest dealer inventory business to acquire Dealertrack, (Sep 30, 2015)

By Peter Reap, J.D., LL.M.

The Department of Justice announced yesterday that it will require Cox Automotive Inc., a subsidiary of Cox Enterprises Inc., to divest Dealertrack Technologies Inc.’s automobile dealership full-featured inventory management solution (IMS) business in order for Cox to acquire Dealertrack through an approximately $4 billion tender offer.

The department’s Antitrust Division filed a civil antitrust lawsuit yesterday in the U.S. District Court of the District of Columbia to block the proposed acquisition. At the same time the department filed a proposed settlement that, if approved by the court, would resolve the competitive concerns alleged in the lawsuit.

“Cox’s proposed acquisition of Dealertrack would have allowed Cox to become the dominant inventory management solution provider in the United States,” said Assistant Attorney General Bill Baer of the Antitrust Division in the announcement. “The divestiture will ensure that automotive dealerships in the United States continue to benefit from the competition that now exists among inventory management solution providers.”

Cox and Dealertrack are the two leading IMS providers, the department’s complaint details. Cox’s acquisition of Dealertrack would increase Cox’s market share from 60 percent to 86 percent. IMS use algorithms and sophisticated analytics to assist automotive dealerships in managing their vehicle inventories. The elimination of competition between Cox and Dealertrack would likely result in higher prices and lower quality for automotive dealerships that use this technology. Accordingly, the transaction was likely to substantially lessen competition in the provision of full-featured IMS.

The proposed hold separate stipulation and order and proposed final judgment, which require Cox to divest Dealertrack’s IMS business to DealerSocket Inc., or to another buyer approved by the United States, remedies the loss of competition in the IMS market. Cox would also be required to enable the continuing exchange of data and content between the divested IMS business and other data sources, Internet sites and automotive solutions that Cox will control. Additionally, Cox must undertake various obligations to prevent Cox from using Dealertrack’s interest in Chrome Data Solutions LP, a company that compiles and licenses vehicle information data for use in inventory systems and other automated solutions and services for the automotive industry.

The proposed hold separate stipulation and order, proposed final judgment, along with a competitive impact statement, will be published in the Federal Register. Any person may submit written comments concerning the proposed settlement within 60 days of its publication to James J. Tierney, Chief, Networks & Technology Enforcement Section, Antitrust Division, U.S. Department of Justice, 450 Fifth Street N.W., Suite 7100, Washington, D.C. 20530. At the conclusion of the 60-day comment period, the court may enter the final judgment upon finding that it is in the public interest.

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