Antitrust Law Daily Wrap Up, ANTITRUST—S.D.N.Y.: Carfax ordered to produce documents related to exclusivity agreements, (Jul 28, 2015)

By Greg Hammond, J.D.

Carfax, Inc. has been ordered to produce documents concerning its decision to use exclusivity provisions in its agreements, in an action where car dealerships claim Carfax monopolized the Vehicle History Report (VHR) market through exclusivity agreements with manufacturers and used car sales websites. In only partially granting the dealerships’ motion to compel, however, the federal district court in New York City limited the timeframe of documents sought, from January 1, 2006 onward (Maxon Hyundai Mazda v. Carfax, Inc., July 24, 2015, Ellis, R.).

Maxon Hyundai Mazda, NYLSI Inc., Tarrytown Honda, Crestview Cadillac Corp., and County Line Buick Nissan are franchised and independent car dealerships in the business of selling used cars. The dealerships filed a complaint alleging that Carfax entered into exclusive dealing arrangements for the sale of VHRs with auto manufacturers and the two largest websites for used car listings—Autotrader.com and Cars.com—and that Carfax’s VHR prices were significantly higher than those of its competitors. These exclusive agreements, according to the dealerships, violate Sections 1 and 2 of the Sherman Act and Section 3 of the Clayton Act.

Carfax moved to compel discovery, and the dealerships moved to compel Carfax’s production of documents and responses to interrogatories.

Carfax’s motion. The court first denied Carfax’s motion to compel the dealerships to produce documents showing: (1) how each plaintiff fared with respect to the price, time until sale, and profitability of selling cars with and without Carfax VHRs; and (2) how plaintiffs’ counsel solicited car dealers for the case. The first category of documents was irrelevant, according to the court, because they have no bearing on whether or not the dealerships were overcharged at the point that they purchased Carfax’s VHRs. The second category was also irrelevant because the documents sought shed no light on whether and to what extent the dealerships incurred damages as a result of Carfax’s alleged conduct, and whether or not the dealership had a proper purpose in bringing their suit is not an issue raised in either the complaint or Carfax’s answer.

Dealerships’ motion. The dealerships sought to compel Carfax to produce documents relating to Carfax’s (1) sales, pricing, marketing support and financial information from January 1, 1997, to the present; and (2) decision to use exclusivity provisions in its agreements, underlying negotiations and communications, and documents analyzing the effects of those agreements, from January 1, 2004, to the present. The court denied the motion as to the first category, finding it overbroad and that the dealerships have not alleged any need for the level of detail articulated in their requests in order to prove their claims or rebut Carfax’s defenses. The motion was granted in part, however, with regard to the dealerships’ second category. The court determined that because the dealerships allege that Carfax’s scheme to monopolize the VHR market was largely in place before 2008, discovery into the drafting and analysis of Carfax exclusivity agreements from January 1, 2006 onward would be appropriate. There was no evidence demonstrating that documents before 2006, when the exclusive agreements did not exist, would be any more probative than documents after that date.

The case is No. 13-CV-2680 (AJN)(RLE).

Attorneys: Daniel John Walker (Berger & Montague, PC) for Maxon Hyundai Mazda, NYLSI Inc., Tarrytown Honda, Crestview Cadillac Corp., and County Line Buick Nissan. Christopher May Mason (Nixon Peabody LLP) for Carfax, Inc.

Companies: Maxon Hyundai Mazda; NYLSI Inc.; Tarrytown Honda; Crestview Cadillac Corp.; County Line Buick Nissan; Carfax, Inc.

Cases: Antitrust NewYorkNews