WASHINGTON, D.C. — The Federal Trade Commission (FTC) has blocked the sale of Auto/Mate Dealership Systems to CDK Global, charging in an administrative complaint issued today that the proposed merger violates federal antitrust laws. The two companies subsequently announced they are abandoning the proposed merger.

According to the regulator’s complaint, CDK Global’s proposed acquisition of Auto/Mate would reduce competition in an already concentrated market, as well as substantially eliminate current competition between the two companies as well as other market participants. The FTC also charged that Auto/Mate was poised to become an even stronger competitive threat in the future, noting that the two parties understated the most likely anticompetitive effects of the transaction.

The commission had authorized FTC staff to seek a temporary restraining order and a preliminary injunction in federal court to prevent the merger pending the administrative proceeding when the two companies announced that the sale was off.

“Today’s announcement from CDK and Auto/Mate that they have decided to abandon their proposed merger is good news for new-car dealers across the country,” said Bruce Hoffman, acting director of the FTC’s Bureau of Competition. “Despite Auto/Mate’s relatively small market share, it was winning a significant share of opportunities from CDK — a larger share than Auto/Mate’s overall market share might have suggested, showing that Auto/Mate was a strong competitor to CDK.”

According to the FTC’s complaint, although smaller than CDK and Reynolds & Reynolds — currently the two largest DMS providers to new-vehicle dealers — Auto/Mate had been winning business by offering dealers lower prices, flexible contract terms, free software upgrades and training, high-quality customer service, and modest fees to integrate third-party applications.

Auto/Mate a 97% customer retention rate, as well as customer satisfaction score after conversions of 93%. “It seems the FTC thought we were too unique and too well positioned to grow and compete, and that allowing CDK to acquire us would take out the only viable competitor to them outside of R&R,” said Larry Colson, Auto/Mate’s managing partner. “Our story has always been one of David vs. Goliath and now we are back to doing business as usual, much to the delight of our customers and employees.”

Late in 2016, Auto/Mate’s shareholders were alerted by Presidio Technology Partners, its financial advisor, that a potentially attractive valuation for the company might be possible in the market. During the sales process that followed, CDK Global made an offer that could not be ignored. Subsequently, the parties reached a definitive agreement in April 2017 that was subject to FTC approval. Eleven months later, that approval was not granted.

According to Auto/Mate officials, the company is no longer for sale, and its shareholders are no longer considering other offers. “This decision and the governmental review process we just completed was arduous, and, quite frankly, we don’t have the stomach to go through it again,” said Auto/Mate President and CEO Mike Esposito. “Auto/Mate’s senior management team and I will remain at the helm.”

“It’s no secret that in recent years we had made substantial inroads into the customer bases of both CDK and Reynolds and Reynolds, switching several large auto groups that have been their bread and butter onto our system,” he added. “With the deal behind us, we can double-down on our primary focus, delivering the market’s best software and best support to our dealers.”