Justice Department Requires Cox Automotive to Divest Inventory Management Solution in Order to Complete Acquisition of Dealertrack
The Department of Justice announced today that it will require Cox Automotive Inc., a subsidiary of Cox Enterprises Inc., to divest Dealertrack Technologies Inc.’s automobile dealership full-featured inventory management solution (IMS) business in order for Cox to acquire Dealertrack through an approximately $4 billion tender offer.
The department’s Antitrust Division filed a civil antitrust lawsuit today in the U.S. District Court of the District of Columbia to block the proposed acquisition. At the same time the department filed a proposed settlement that, if approved by the court, would resolve the competitive concerns alleged in the lawsuit.
“Cox’s proposed acquisition of Dealertrack would have allowed Cox to become the dominant inventory management solution provider in the United States,” said Assistant Attorney General Bill Baer of the Antitrust Division. “The divestiture will ensure that automotive dealerships in the United States continue to benefit from the competition that now exists among inventory management solution providers.”
According to the department’s complaint, Cox and Dealertrack are the two leading IMS providers. Cox’s acquisition of Dealertrack would increase Cox’s market share from 60 percent to 86 percent. Inventory management solutions use algorithms and sophisticated analytics to assist automotive dealerships in managing their vehicle inventories. They are used most frequently by large franchised and independent dealerships, which are more dependent on robust, automated solutions to manage their businesses. The elimination of competition between Cox and Dealertrack would likely result in higher prices and lower quality for automotive dealerships that use this technology.
The proposed consent decree, which requires Cox to divest Dealertrack’s IMS business to DealerSocket Inc., or to another buyer approved by the United States, remedies the loss of competition in the IMS market. The proposed consent decree also requires Cox to enable the continuing exchange of data and content between the divested IMS business and other data sources, internet sites and automotive solutions that Cox will control. Additionally, Cox must undertake various obligations to prevent Cox from using Dealertrack’s interest in Chrome Data Solutions LP, a company that compiles and licenses vehicle information data for use in inventory systems and other automated solutions and services for the automotive industry.
Cox Enterprises Inc. and its subsidiary Cox Automotive Inc. are privately-held Delaware corporations with their headquarters in Atlanta. Cox sells a diverse portfolio of leading automated solutions and services for automotive dealers and consumers, including vAuto, an IMS. Cox’s total annual automotive revenue in 2014 was about $4.9 billion, of which it’s U.S. IMS revenue was a small part.
Dealertrack is a Delaware corporation with its headquarters in Lake Success, New York. Dealertrack sells a variety of automated solutions and services for automotive dealers, including Inventory+, an IMS that combines the functionality from two IMSs that Dealertrack acquired – AAX and eCarList. Dealertrack’s total annual net revenue in 2014 was about $854 million, of which it’s U.S. IMS revenue was a small part.
As required by the Tunney Act, the proposed consent decree, along with a competitive impact statement, will be published in the Federal Register. Any person may submit written comments concerning the proposed settlement within 60 days of its publication to James J. Tierney, Chief, Networks & Technology Enforcement Section, Antitrust Division, U.S. Department of Justice, 450 Fifth Street N.W., Suite 7100, Washington, D.C. 20530. At the conclusion of the 60-day comment period, the court may enter the final judgment upon finding that it is in the public interest.
Cox Complaint (205.74 KB)
Cox Hold Separate & PFJ (186.8 KB)
Cox CIS (188.69 KB)
Cox Explanation (48.19 KB)