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Authenticom's 'Stunning Victory' in Antitrust Suit on Hold

August 01, 2017

LA CROSSE, Wis. — The federal court judge presiding over Authenticom’s antitrust suit against CDK Global and Reynolds and Reynolds Co. today issued a seven-day stay of the preliminary injunction he confirmed on Friday.

On Friday, Judge James Peterson of the U.S. District for the Western District of Wisconsin declared that the DMS providers can’t prevent “Authenticom from using login credentials to provide data integration services for dealers who, as of May 1, 2017, had authorized Authenticom to provide data integration.” The two DMS providers filed notices of appeal with Seventh Circuit Court of Appeals on Monday.

In today’s order, Judge Peterson said he granted Reynolds’ request for a temporary stay pending the Court of Appeals for the Seventh Circuit’s decision on whether to hear the appeal. In the meantime, the court will evaluate the respective harms both DMS providers claimed they will suffer from his preliminary injunction.

“The court is not persuaded that defendants have demonstrated that Authenticom’s limited, closely monitored access will significantly increase cybersecurity risks,” Judge Peterson stated in his order, adding that the court did no grant the injunction as Authenticom had requested.

“The harms that the parties will face depend in large part on whether the Seventh Circuit will expedite defendants’ appeal,” he added. “If so, perhaps Authenticom can weather the stay. If not, a stay pending appeal will effectively eviscerate the preliminary injunction itself. This much is clear: justice will be served by a prompt decision.”

Authenticom’s directors filed suit against CDK and Reynolds on May 1, claiming the data-security measures undertaken by the two DMS providers have threatened its survival by limiting access to dealer data stored on their DMS offerings and may be in violation of the federal anti-monopoly Sherman Act.

On July 17, the data integration provider was granted a preliminary injunction preventing the two software makers from blocking access to their DMS offerings while the case proceeds. The order called for all three parties to “agree on all terms of the injunctions” or submit “competing proposals” by July 21, effectively creating a framework by which Authenticom can — with deal authorization — continue to access data entered into CDK and Reynolds’ systems.

The day the deadline was set to expire, Reynolds filed a counterclaim accusing Authenticom of hacking into its system without permission to “scrape” and “extract” data, putting “at risk the millions of people whose [personally identifiable information] and other confidential data are jeopardized by ‘hostile’ integrators like Authenticom.”

When Peterson entered the final form of his preliminary injunction orders this past Friday, he also confirmed his prior ruling that CFK and Reynolds must stop blocking Authenticom from providing data services to dealers and vendors. Authenticom CEO Steve Cottrell called it a “stunning victory.”

“Today is another important step forward for Authenticom and the entire automobile industry as a whole,” Cottrell said. “As I said before, we look forward to providing secure, cost-effective, and reliable data integration services to our dealer and vendor customers, finally without the threat of being hindered by CDK’s and Reynolds’s anticompetitive conduct.”

In a statement announcing its intent to appeal Friday’s ruling, CDK Global said that while the preliminary injunction doesn’t give Authenticom “free reign to maximize its business as it sees fit,” the firm believes “that preventing hostile access is the best way to preserve the integrity of our systems and the security of our customers’ data.”

“We will continue to defend ourselves vigorously against Authenticom’s meritless compliant,” the company added.

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