In Brief: Two class action settlements in 2024 present significant opportunities for auto dealerships to recover damages: the CDK/Reynolds and Reynolds antitrust settlement, addressing alleged monopolistic practices in dealership management system (DMS) software, and the Visa/Mastercard Interchange Fee settlement, regarding excessive credit card processing fees. Is your dealership eligible to file a claim?
Two major expenses for dealers, and recent subjects of increased scrutiny, are monthly DMS fees and credit card payment processing fees. DMS fees have been a long-standing pain point for dealers, who are faced with limited viable alternatives and minimal pricing power. Credit card fees are an expense that has grown rapidly in recent years and directly eroded dealer profits with little-to-no recourse available. However, recent class action suits have put the spotlight on some of the unfair pricing power and anti-competitive actions undertaken by the biggest names in DMS and credit card processing, with potential settlement funds available to dealers.
The CDK and Reynolds Settlement
The DMS Antitrust Litigation was related to claims against CDK Global, LLC (CDK) and Reynolds and Reynolds Company (Reynolds) for alleged collusion and anticompetitive practices. The claim sought damages for affected dealers that used either CDK or Reynolds for their DMS or related data integration services during the period from September 1, 2013 through August 15, 2024. Dealers that only used these providers for a portion of the period, or those that are no longer using either provider, may still file a claim as part of the settlement. Both CDK and Reynolds agreed to settle the class action, with CDK agreeing to pay $100 million and Reynolds agreeing to $29.5 million. Preliminary court approval was obtained in August 2024 and the ability to file claims commenced in late September 2024.
In order to file a claim, affected dealers should go directly to the official settlement website: https://dealershipclassdmssettlement.com.
The site provides various links, documents, and other helpful information regarding the settlement, as well as a direct link for filing a claim. The website also clearly indicates that a third-party settlement agent or service is NOT necessary in order to file a claim. The information needed should be readily available to dealers and it’s expected most dealers will be able to file their claim without the aid of a third-party. Dealers that wish to file a claim need to do so by January 9, 2025.
Additionally, dealers have until December 12, 2024 to object to the Fee and Expense Application and/or Allocation Plan, which governs how the attorneys representing the class and other involved parties will be compensated from the settlement funds. The Fee and Expense Application will be filed on November 27, 2024, but the fees and expenses are limited to a maximum of roughly 40% of the settlement funds.
The Visa and Mastercard Settlement
This lawsuit is related to merchant fees charged to dealers, and others that accepted Visa and Mastercard payments from January1, 2004 through January 25, 2019. The suit purports that Mastercard and Visa used their position in the market to set interchange fees at inflated prices while taking steps to eliminate alternatives and reduce competition.
The Visa and Mastercard suit is not dealer-specific, but a large number of dealers are expected to have been impacted. The total settlement to be paid out will be between $5.54 and $6.24 billion; however, as this isn’t dealer-specific, the class is likely to be much larger than that of the DMS settlement.
This suit has been around for over five years, but due to a recent extension, the claim filing period was extended to February 4, 2025. To file a claim, dealers should go directly to the official settlement website: https://www.paymentcardsettlement.com/en. As with the DMS settlement, third-party service providers are not necessary, and dealers can file these claims directly through the settlement website.
The Road Ahead
While these settlements are a welcome outcome, they did not result in any admission of guilt or wrong-doing on the part of the defendants, nor were the defendants required to make any changes in how they operate. As such, dealers should continue to closely monitor their expenses and the vendors they choose to utilize in their dealerships. The funds made available from the settlement will not fully offset the costs that dealers continue to incur for DMS or credit card processing services, but any impacted dealers should still take the opportunity to recoup what they can from the settlement funds. ARB will continue to monitor and provide updates on these and other key lawsuits that impact auto dealers. As always, we recommend seeking the guidance of qualified financial advisors to determine if your business may benefit from these settlements and how best to submit your claim.
Matthew Marcoullier is a director at ARB. He focuses primarily on financial accounting and consulting services for auto dealerships, commercial businesses, and closely-held businesses. Matt previously served as a Senior Auditor for the State of Maine Department of Audit.
