Used car dealers sue Carfax, claim antitrust violation
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More than 100 used car dealers, including 11 on Long Island, have sued Carfax, claiming that the provider of heavily advertised vehicle history reports is violating federal antitrust laws by excluding competition.
The suit says that the near absence of competition results in higher prices for dealers, who furnish the reports to car shoppers, and for consumers who purchase the reports on their own, while discouraging sales of what the suit says are more reliable competing reports.
A spokesman for Virginia-based Carfax Inc. declined to comment.
The suit, filed in U.S. District Court in Manhattan, names 120 dealers from as far away as Florida and Washington state as plaintiffs and seeks $50 million in damages. It contends that Carfax abuses its monopoly power by effectively precluding used-car dealers from using any other provider of vehicle history reports, including AutoCheck, a service of Experian PLC, of Ireland, best known for its credit reports.
"The reason 90 percent of dealers use Carfax is not because they want to, but because they feel handcuffed into using it, despite the fact that their reports are more than double the price of AutoCheck's," said the attorney who filed the suit, Leonard Bellavia of Bellavia, Blatt, Andron & Crossett, a Mineola firm that often represents car dealers.
The suit says Carfax "has unlawfully acquired and maintained its market power in vehicle history reports through exclusivity agreements with numerous players in the auto industry."
Those players include the two most popular websites for advertising used cars -- Cars.com and AutoTrader.com. Under the agreements, listings on the sites can display only the logo for Carfax reports -- and include links only to Carfax reports, the suit says.
"Carfax has stigmatized any listing without such a link in the eyes of consumers who infer that the absence means that the car has a blemished history," the suit alleges.
Further, it claims, dealers participating in 37 of 40 automobile manufacturer "certified pre-owned" used-car sales programs are required because of agreements between Carfax and vehicle manufacturers to purchase Carfax reports for each car they sell.