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The Only FTC Complaint You’ll Want to Read

by Mike Esposito

As you’ve probably heard by now, the FTC recently blocked the pending acquisition of Auto/Mate by CDK Global. We’ve shared our interpretation of the FTC’s decision with the media, our customers and employees in various communications including a press release, emails and social media.

 

Auto/Mate’s official stance in these communications was that the government considered us to be unique disruptors, and virtually the only DMS vendor in a strong enough position to effectively compete against both CDK Global and Reynolds & Reynolds.

 

We decided to share the details of the decision as published by the FTC itself on March 23. Keep in mind that the FTC arrived at the following conclusions after an extensive, 11-month review of documents and interviews with a variety of industry players, including dealers, competing companies, consultants, CDK employees and Auto/Mate shareholders.

 

We particularly enjoyed sections 3,4,7 and 18-21.

 

  1. NATURE OF THE CASE

 

  1. Auto/Mate is an innovative, disruptive challenger to the two market leaders. It offers franchise dealerships a distinct value proposition, including strong functionality, low pricing, an agnostic platform for third-party applications, extensive OEM certifications, short contracts, free software upgrades and training, and a reputation for high-quality customer service. In recent years, Auto/Mate has grown as a competitive threat in the franchise DMS market, including by specifically targeting CDK customers. Auto/Mate has consistently expanded its customer base and revenues through both aggressive pricing and adapting its differentiated product to match the preferences of many franchise dealers, placing pressure on CDK’s pricing and margins. It has also developed features attractive to larger franchise dealerships and as a result, became an increasing threat to take more customers from CDK. CDK identified Auto/Mate as a current and emerging threat and responded aggressively by discounting and offering more flexible and better terms to customers.

 

  1. In the fall of 2016 when Auto/Mate placed itself up for sale, CDK concluded that it could eliminate a strong competitor, which was threatening to become an even more disruptive rival, by simply purchasing the company…

 

  1. Today, competition from Auto/Mate yields a myriad of substantial benefits to franchise dealers. Auto/Mate’s presence in this market means lower prices, greater innovation, more flexible contract terms, and better service. If consummated, the Acquisition would eliminate the considerable and growing competition between CDK and Auto/Mate. It would also eliminate competition between Auto/Mate and other DMS providers, and thereby cause significant and pervasive harm to franchise dealers.

 

  1. Customers frustrated with CDK’s and Reynolds’ business practices have faced significant challenges in switching DMS suppliers, and, historically, a lack of good alternatives to the two market leaders….

 

  1. Auto/Mate is a low price, innovative company that has posted consistent, double-digit growth in recent years. A significant portion of Auto/Mate’s wins in recent years have come at CDK’s expense. Auto/Mate’s value proposition includes but is not limited to, low prices, an ample and growing set of features, month-to-month contracts, the choice of on-site or cloud server deployment, a full roster of major OEM certifications, a low-cost agnostic platform for third-party applications, a strong reputation, and excellent customer service.

 

  1. Today, no other DMS offers Auto/Mate’s combination of low prices, high functionality, and strong customer service. These attributes position Auto/Mate well to effectively challenge the market leadership of CDK and Reynolds. According to its internal business documents, Auto/Mate plans to grow its market share both by continuing to aggressively court and win small franchise dealership customers as well as by continuing to expand on its recent successes in winning larger franchise dealership customers…

 

  1. Compared to Auto/Mate, each remaining DMS provider, including Dealertrack and Autosoft, lacks important features or value, including but not limited to, low pricing, important software functionalities, important OEM certifications, month-to-month contracts, or a strong reputation. Many of these DMS providers have failed to show significant growth or have stagnated or contracted in the last several years. Many of the remaining DMS providers have significant limitations on their capacity to add and support new customers.

 

The entire, redacted public version of the FTC complaint can be viewed here. https://www.ftc.gov/system/files/documents/cases/docket_no_9382_cdk_automate_part_3_complaint_redacted_public_version.pdf

 

What’s Next for Auto/Mate?

 

It’s back to business as usual, which for us, means David vs. Goliath.

 

Auto/Mate is officially off the market. We just want to go back to what makes us get up in the morning: working every day with the best people on Earth to create great software for great customers. The senior management team remains intact, and I have decided to postpone retirement.

 

Auto/Mate has always pursued a business model of slow and steady growth, but since the FTC seems to think we are well-positioned to take over the DMS market, we figure “What the heck, maybe we should.” So, onward and upward. We’re back. We are Auto/Mate!

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