The proposed CDK Global purchase of Auto/Mate announced in May 2017 will not be going through.

The Federal Trade Commission said it has issued an administrative complaint arguing the merger would be in violation of federal antitrust laws.

After being notified of the FTC opposition, the two software vendors jointly agreed to terminate the deal, CDK said in a news release Tuesday.

The planned purchase was first announced May 24.

“Both companies expressed disappointment at not being able to complete the transaction in a timely fashion, citing the desire, in the face of regulatory resistance, to redirect their resources and attention to their businesses,” CDK said. “The companies intend to focus on delivering value to their respective customers in a competitive marketplace.”

Details of decision

FTC said its complaint argues the deal would have decreased competition “in an already concentrated market.”

The commission also suggested Auto/Mate was likely to become more competitive down the road, meaning the “existing, current competition between the parties understates the most likely anticompetitive effects of this transaction.”

FTC staff were also authorized by the commission to pursue a temporary restraining order and a preliminary injunction to keep the deal from happening.

CDK and Auto/Mate then notified FTC of their decision to halt the deal, the commission said.

“It seems that the FTC thought we were too unique and too well positioned to grow and compete, and that allowing CDK to acquire us would take out the only viable competitor to them outside of R&R,” Auto/Mate managing partner Larry Colson said in a news release, referring to Reynolds & Reynolds with the latter acronym.

“Our story has always been one of David vs. Goliath and now we are back to doing business as usual, much to the delight of our customers and employees,” he said.

Auto/Mate said the company is not on the market, nor are shareholders looking “any other offers.”

Auto/Mate president and chief executive Mike Esposito said: “This decision and the governmental review process we just completed was arduous, and quite frankly, we don’t have the stomach to go through it again.”

Esposito also noted that he and senior management will remain in place.

In an additional statement provided to Auto Remarketing, CDK said:  “While we are disappointed that we won’t be able to complete this transaction, CDK has been actively developing a new offering designed especially for the unique needs of dealers with one or two locations. That ground-breaking Dealer Management System — Drive Flex DMSaaS — was recently announced and will be demonstrated later this week at the NADA Show in Las Vegas. With its revolutionary Flex pricing model and modern, cloud-based architecture, we now have a competitive offering for dealers that have one and two locations.”

More from FTC vantage point

In the FTC news release, Bruce Hoffman — who is Acting Director of the Bureau of Competition — called the move by CDK and Auto/Mate “good news” for U.S. franchised dealers.

“Dealerships will continue to benefit from the disruptive and innovative efforts of Auto/Mate, resulting in improvements to DMS offerings across the industry,” Hoffman said.  

“Despite Auto/Mate’s relatively small market share, it was winning a significant share of opportunities from CDK — a larger share than Auto/Mate’s overall market share might have suggested, showing that Auto/Mate was a strong competitor to CDK,” Hoffman explained.

“Moreover, the evidence indicated that Auto/Mate was also a threat to other incumbent DMS providers, and, importantly, was poised to become an even more effective competitor in the near future,” he continued. “The Commission’s action shows that it will block a proposed merger if a large, established firm seeks to eliminate competition from a small but significant and developing competitor that is delivering substantial competitive benefits in innovation, price, and quality.”