Show Me the Carfax

Over 120 auto dealerships have been linked to a lawsuit suing Carfax for damages resulting from engagement in anti-competitive practices. The suit, seeks damages of over $50 million and more dealerships are applying to be part of the suit. Carfax, the largest provider of used-vehicle history reports, is accused of exchanging cash for exclusive agreements that shutout its competitor. Exclusive agreements with AutoTrader.com and Cars.com force dealers that use those sites to only post vehicle history reports from Carfax.

The result of this case will determine whether a real emergence of a true market of used-vehicle history reports comes to fruition. Since Carfax is considerably more expensive than other used-vehicle report providers it seems likely that a ruling against Carfax is coming. Prices for reports seem somewhat arbitrary (between 800 and 1600$ a month) which doesn’t make a lot of sense because they are electronic.

3 comments to Show Me the Carfax

  • Of late market power in the auto industry has been companies attempting to screw other companies – $1 billion in fines paid by suppliers the past year or so in a series of related casee. But alongside Carfax there’s TrueCar, how should things be structured in the internet age, what tactics are legal (and which effective). But when I’ve looked at used car ads online, I’ve clicked for their Carfax reports. Who pays? If I’m just idly shopping, my click costs someone money.

  • andrew

    I find the law suit very interesting. From my understanding, it is clear that Carfax is not engaging in any sort of illegal action. They are simply using their market power to shut-out competitors. If this is the case, I say more power to them. If they can demand that sort of price from dealers and have a majority market share them I am impressed by their market strategy. In this regard, it will be very interesting to see the court ruling.

  • gjeong

    The point that I want to make is that while the consumers enjoy using Carfax, others are not happy because Carfax is considered as a monopoly in the industry. It holds about 90 percent of the market share with the exclusive agreements, and there are lots of complaints from the others. However, since (if I remember correctly,) being a monopolist is not illegal, I do not think there is any legal problem with it. Another point to be made is that, as we talked about in the class, being a monopolist can lead to a poor management. Just like the Detroit 3, Carfax might face the same situation and eventually lose its leading position in the industry.

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