Antitrust Law Daily Wrap Up, ANTITRUST—N.D. Cal.: Car dealer management system monopoly case survives dismissal motion, (Jul 16, 2025)

By Kenneth H. Ryesky, M.B.A., J.D.

Defendant market dominator who obstructed customers from exiting its automobile dealer management system alleged to be "well aware of [the] threat posed by competitor's innovative product.

The federal district court in San Francisco, California has denied a dismissal motion by an automobile dealer management system purveyor who allegedly obstructed its customers from changing over to competing systems. The judge ruled that the competing system provider had plausibly alleged monopolization under the Sherman Act. The federal Sherman Act claims being upheld, the court continued to exercise its jurisdiction under the state law claims, and ordered the defendant to file its answer (Tekion Corp. v. CDK Global, LLC, No. 3:24-cv-08879-JSC (N.D. Cal. July 15, 2025)).

Background. The typical sale of an automobile entails not only the automobile itself, but also the provision of services after the buyer has taken possession of the vehicle. There also are finance and credit aspects to the transaction. Technological innovations in the automotive industry have placed increasingly complex recordkeeping and data reporting demands upon automobile dealers, especially when the automobile dealer is a franchisee and must have continuing interface with not only the customer, but also the manufacturer. The industry is also subject to regulation by many governmental agencies at state and federal levels. There accordingly has arisen a market for automobile dealership management systems (DMS), "sophisticated, specialized software products that are mission critical for franchise, i.e., new car, dealerships."

CDK Global, LLC (CDK) "is the incumbent industry giant in the DMS market for franchise dealers," commanding approximately 60 percent of the revenue from the overall market, and an even greater share from the large enterprise dealer segment of that market.

The Chief Information Officer of Asbury Automotive Group, Inc. (Asbury), one of America's largest publicly traded automobile dealership operators, became concerned that CDK's capabilities had become inadequate for Asbury's dealerships, and negotiated a deal with DMS provider Tekion Corp. (Tekion), whose DMS seemed to have superior attributes compared to CDK's, to use Tekion's DMS on a trial basis in four of Asbury's dealerships. CDK had previously begun to restrict its customer's access to their own data when its customers sought to transfer to a competing DMS, using delaying tactics such as insisting that all accounts receivable be satisfied before data could be accessed, imposing theretofore nonexistent bureaucratic submissions, and/or refusing to honor reasonable data transfer schedules. Asbury's account was disabled by CDK when Asbury attempted to access it in preparation for the deal with Tekion.

A lawsuit by CDK against Asbury and a countersuit in a different state by Asbury against CDK were initiated, Asbury prevailed in its own lawsuit in which CDK was enjoined to give Asbury access to its data for the pilot program with Tekion's DMS. In a separate related lawsuit assigned to the same judge, CDK sued Tekion and another entity, alleging that Tekion's participation in automobile dealers' attempts to switch from CDK's DMS to Tekion's DMS violated various computer security statutes [Tekion Corp. v. CDK Global, LLC v. Tekion Corp., case No. 3:25-cv-01394-JSC (N.D. Cal.)].

Other automobile dealers seeking to migrate to Tekion's DMS were stymied by CDK's practices. Tekion accordingly sued CDK in federal district court, alleging (1) monopolization and attempted monopolization under the Sherman Act [15 U.S.C. § 2]; and (2) various California state common law and statutory claims. CDK moved for dismissal.

Sherman Act-monopoly power. The judge found that Tekion plausibly pleaded that CDK possesses monopoly power. CDK's DMS was alleged to be used by "five out of the six largest public dealer groups," including Asbury. Tekion also asserted that the DMS market has high barriers to entry, that a DMS system "is a sophisticated and specialized product essential to users in a regulated industry of national importance," and that switching from one DMS system purveyor to another is an inherently complex, risky, and time-consuming process. These allegations were found to suffice as indirect circumstantial evidence of monopoly power in the relevant market.

Sherman Act-anticompetitive conduct. The court ruled that Tekion plausibly pleaded that CDK possesses had engaged in anticompetitive conduct. CDK's alleged delaying scheme "chills dealerships from otherwise choosing to migrate to a different DMS provider," thereby compelling automobile dealerships "to stay with CDK's product for longer than desired." The conduct alleged here "only targets dealerships that seek to migrate from CDK to its rivals, thus harming competition."

Sherman Act-antitrust injury. The court found that Tekion plausibly pleaded antitrust injury. CDK's conduct interposed obstacles to switching from CDK's product to those of its competitors as automobile dealers in the industry were becoming increasingly frustrated at the inadequacies of CDK's DMS. This allegation went beyond the harms incurred by Tekion, and extended to the competition processes within the entire industry.

The Case is No. 3:24-cv-08879-JSC.

Judge: Corley, J.

Attorneys: Tyler Griffin Newby (Fenwick & West LLP) for Tekion Corp. Jesse-Justin Cuevas (Susman Godfrey L.L.P.) for CDK Global, LLC.

Companies: Tekion Corp.; CDK Global, LLC

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