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Auto dealers sue Carfax for $50 million

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Melanie Stetson Freeman/Staff

(Read caption) Pre-owned Porsches are on display in the front lot at Porsche of Norwell in Norwell, Mass. Carfax has exclusivity agreements with several popular used-car sites, Read writes.

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Carfax's catchy ads have encouraged millions of Americans to say "Show me the Carfax!" when purchasing used cars. That's great for Carfax's bottom line, but not so much for the dealers who have to provide those brand-name reports -- to the tune of $16.95 a pop, or a monthly subscription of up to $1,549.

According to AutoNews, 120 dealerships from across the U.S. are now suing Carfax for violating antitrust laws. And according the lawyer handling the case -- Leonard Bellavia of Bellavia Blatt Andron & Crossett in Mineola, New York* -- dozens more dealerships have submitted paperwork to join the suit.

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Bellavia's clients are suing Carfax for $50 million in damages. Among the plaintiffs' allegations:

  • Carfax has exclusivity agreements with several popular used-car sites. In practical terms, that means dealers selling vehicles on those sites can only show vehicle history reports from Carfax, which effectively shuts out the competition.
  • Out of 40 used-car certification programs run by automakers, Carfax has exclusive arrangements with 37. In other words, if you're looking at vehicle history report on a certified used car, there's a very good chance that your dealer has been obligated to use Carfax. 
  • Carfax charges more for vehicle history reports than its competitors. 

Adding a little bit of spice to the plaintiff's case is the fact that Carfax reports aren't always accurate. Carfax and its competitors rely largely on the National Motor Vehicle Title Information System, a database of insurance claims and other data pulled from 41 states. Vehicle info from other regions can be left out of those reports, resulting in inaccuracies, not unlike the kind recently uncovered on 20/20. (Check out that news segment, embedded above.)

What does Carfax have to say about these allegations? So far, the company hasn't released a statement on the matter.

* If Bellavia's name sounds familiar, that's because he was also the lead attorney for U.S. Saab dealers seeking Chapter 11 bankruptcy status last year.