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April 18, 2002


The opinion of the court was delivered by: Ian H. Levin, United States Magistrate Judge


Before the court is ChoiceParts' ("Plaintiff") Motion for a Preliminary Injunction. The subject motion concerns Plaintiffs assertion that Defendants General Motors Corporation ("GM"), DaimlerChrysler ("DCX"), Ford Motor Company ("Ford") and OEConnection, LLC ("OEC") willfully conspired to withhold automotive parts data Plaintiff needs to operate it's automotive parts locator business. Consequently, Plaintiff in this motion alleges that Defendants' refusal to provide parts data constitutes a conspiracy that unreasonably restrains trade in contravention of the antitrust laws.

I. Background

A. Original Equipment Manufacturers

Defendants GM, DCX and Ford are Original Equipment Manufacturers ("OEM") who sell automobiles and original equipment ("OE") parts through their dealers. Defs.' Mem. at 2. Specifically, each OEM sells parts only through its authorized dealers, who then compete with each other and with "aftermarket" (non-GE, knock-off) and "salvage" (recycled) parts sellers. Id. Dealers, in turn, sell GE parts to other dealers, collision shops, and retail customers. Id. Dealers buy parts from other dealers when, for example, a needed part is unavailable from an OEM. Id.

Dealers have many ways of locating automotive parts. Defs.' Mem. at 3. For instance, they can call other dealers or they can use electronic parts locator services; such as OneTouch, National Parts Locator ("NPL"), or Parts Voice. Id. Moreover, each OEM has developed data about each of its parts, including detailed pricing information and cross-references to substitutable parts (i.e., "supersession data") (collectively, "Parts Data"). Each Defendant OEM owns its own Parts Data and this data is considered to be highly proprietary. Id.

Almost all automobile dealers manage their parts businesses with software called "dealer management systems" ("DMSs"). Defs.' Mem. at 3. The two largest DMS providers are Reynolds & Reynolds ("Reynolds") and Automated Data Processing ("ADP"). Id. Each OEM licenses its Parts Data to DMS providers for use by its respective dealers. Id. Moreover, OneTouch, NPL, and Parts Voice receive Parts Data from each OEM.*fn1 Id. However, none of the OEMs license their Parts Data to these companies, or to any others that sell non-OE aftermarket parts. Id.

OEC is a joint venture which was formed by Defendants GM, Ford and DCX, and Bell & Howell in December, 2000. Pl.'s Mem. at 11. OEC was established for the purpose of operating a parts locator service using Defendants' Data Parts and selling OE parts only. Id. at 12.

B. ChoiceParts

ChoiceParts was created as a joint venture in May, 2000 by three companies in the automotive software industry: ADP (over $6 billion in annual revenue), Reynolds ($1 billion in annual revenue) and CCC Information Services ("CCC") (over $200 million in annual revenue).*fn2 Pl.'s Mem. at 3. ChoiceParts was organized to "engage in the business of creating and operating an Internet and network-based marketplace for the purchase and distribution of OEM Parts, Non-OEM Parts and Salvaged Parts." ChoiceParts was based upon its founding companies' industry knowledge and expertise to create an end-to-end solution comprised of two components: (1) dealer-to-dealer software designed to enable dealers to locate parts from other dealers and consummate transactions electronically, and (2) dealer-to-collision shop software designed to allow dealers to accept orders electronically from collision shops, interface with the dealer-to-dealer locator software as necessary, and consummate sales transactions with collision shops electronically. Id.

Plaintiff initially developed an automotive parts locator designed to provide participating dealers with access to real-time inventory information from potential sellers. Pl.'s Mem. at 4. The software allows dealers to search not only for specific part numbers, but also (using "supersession" data) to locate parts that are interchangeable with the original part identified by the dealer. Id. Plaintiff plans to integrate its dealer-to-dealer software with DMS's enabling selling dealers to automatically generate invoices and adjust inventory information. Id.

In the latter part of 2000, Plaintiff conducted a "proof-of-concept" test pilot of the dealer-to-dealer software in Dayton, Ohio. Pl.'s Mem. at 4. As a result of the test pilot, Plaintiff initiated and signed contracts with over 250 dealers (including GM, Ford and DCX dealers). Id. In April, 2001, Plaintiff acquired rights to software used by collision shops. Id. Plaintiff has, subsequently, developed dealer-to-collision software allowing collision shops to order parts from dealers electronically rather than by manual ordering processes. Id.

II. Plaintiff's Motion for Entry of a Preliminary Injunction

A. Introduction

In its opening memorandum, Plaintiffs threshold assertion is that it has satisfied the requirements for entry of a preliminary injunction. Pl.'s Mem. at 14.

A party seeking a preliminary injunction must establish: (1) some likelihood of succeeding on the merits; (2) that it has "no adequate remedy at law," and (3) that it will suffer "irreparable harm," if preliminary relief is denied. Abbott Lab. v. Mead Johnson & Co., 971 F.2d 6, 11 (7th Cir. 1992) (citing Lawson Prods., Inc. v. Avnet, Inc., 782 F.2d 1429, 1433 (7th Cir. 1986); Roland Mach. Co. v. Dresser Indus., Inc., 749 F.2d 380, 386-87)). If the moving party is unable to establish this threshold showing, the court's inquiry is over and the injunction will be denied. Id. If the moving party can satisfy this showing, the court must then consider the irreparable harm the non-moving party will suffer if preliminary relief is granted, balancing that harm against the irreparable harm to the moving party if relief is denied. Id. Lastly, the court must also consider the public interest, that is, the consequences to non-parties of granting or denying the injunction. Id.

B. Arguments

(1) Plaintiff presents the following arguments in support of its assertion that it will succeed on the merits of its antitrust claim.

(a) Plaintiff first argues that Defendants' concerted refusal to provide it with Parts Data violates Section 1 of the Sherman Act. Pl.'s Mem. at 14. To prevail under Section 1, Plaintiff asserts that it must establish a "contract, combination, . . . or conspiracy" that unreasonably restrains trade. 15 U.S.C. § 1.

(i) Direct Evidence of Conspiracy

Plaintiff alleges that there is direct evidence of a conspiracy, in that, Defendants have unlawfully agreed not to provide Parts Data to Plaintiff. Pl.'s Mem. at 15. Plaintiff presents the following evidence in support of its conspiracy theory.

Plaintiff asserts that the conspiracy began in early 2000. Pl.'s Mem. at 8. For example, in GM's March 10, 2000, "Opportunities and Threats" presentation to its parts division management, Plaintiff was described as a potential threat to GM's revenue; thereby, jeopardizing the division's ability to meet commitments made to GM's Board of Directors. Knott Ex. 1; Mackie Dep. 89. Shortly thereafter, in early May 2000, GM, Ford and DCX representatives attended a private conference conducted by Carlisle & Company ("Carlisle"), an industry consultant that had worked extensively with GM, DCX and other OEMs. Id. At the conference, Carlisle presented a report on Internet threats, which specifically identified Plaintiffs firm as one that "may particularly threaten the genuine collision parts business" by putting pressure on profit margins. Smith Ex. 1; Knott Dep. 34-35. In a draft document provided to GM prior to the conference, Carlisle further opined that "[t]he name of the game is in controlling the portals" and "[t]he only way to beat this challenge is to retake control of dealer parts management practices." Carlisle Ex. 3.

On May 4, 2000, GM met with Plaintiff, and responded to Plaintiffs prior requests for Parts Data by presenting Plaintiff with a list of "Veto Rights/Boundary Conditions" which Plaintiff would need to accept before GM would consider providing the requested Parts Data. Mackie Ex. 7; Loeffler Ex. 1. GM's "boundary conditions" were designed to impose control over Plaintiffs business model by dictating an "OE-centric" business model that would ensure that the benefits of any Internet-based solutions developed by Plaintiff would be denied to companies manufacturing non-OE parts. Id.

On May 5, 2000, senior officials of GM and Ford met and discussed the "threat" Plaintiffs parts locator business posed to their profitability. Pl.'s Mem. at 9. At the meeting, GM shared its "Opportunities and Threats" presentation posed by "Internet start-ups" with Ford. Tudor Dep. 53-55; Tudor Ex. 5. The main threat GM discussed with Ford was that such "Internet start-ups" reduce OEM profits by increasing competition from non-OE parts. Plaintiffs company was identified as one posing such a threat during the meeting. Tudor Dep. 58.

On May 18, 2000, GM and DCX met to discuss Carlisle's proposal for a "Genuine Parts Exchange." Pl.'s Mem. at 9. During the meeting, Carlisle warned GM and DCX that Plaintiff would make it easier in the future to buy non-OE parts; thereby, threatening OEM profit margins. Carlisle further expressed the belief that "it is unlikely that an unorganized consortium of OEs will be able to gain control of [Plaintiff] and guarantee maintenance of its current closed exchange environment." Smith Dep. at 53-55. Carlisle concluded that "the smart response is to counter with the collaborative development of a closed exchange that will trade only in genuine parts, from all partner OEs." Id.

Plaintiff argues that Defendants GM, DCX, and Ford recognized that changes in the automotive parts business posed substantial threats to their ability to maintain historic levels of profitability on the sale of replacement parts. Pl.'s Mem. at 9-10. Defendants responded to these threats by jointly creating an OEM-only parts portal (i.e., Marmaduke/OEC) to control the purchase and sale of parts in a way that would suppress the emergence of new forms of competition. Id. at 7-8.

Plaintiff argues that Defendants GM, Ford, and DCX, and Bell & Howell created Marmaduke/OEC so that it "[would] be the sole source for accurate OEM data." Pl.'s Mem. at 12. (DCX 001884.) In mid-August 2000, GM prepared the Terms of Agreement for the formation of Marmaduke/OEC. The Agreement provided, inter alia, that:

Technology partners not agreeing to terms for participation in the OE portal will be left to compete against the OE portal in the marketplace, without benefit of OE endorsement or OE catalog or technical service information. (Loeffler Ex. 17.)

A September 14, 2000 draft proposal among Defendants GM, DCX, and Ford, and Bell & Howell provided, inter alia, that:

The 3 OEM's also agree not to participate or support any other automotive parts eCommerce initiative with a similar vision of the Portal. The 3 OEMs further agree not to provide access to the parts catalog data and other related Intellectual Properties to other parties potentially competing with the Portal. Baumgartner Ex. 31 (Pl.'s Mem. at 12.)

Moreover, in a memorandum of understanding that led to the formation of OEC,*fn3 Defendants indicated that Plaintiff has "no OEM data" and "of course this gives OEMs leverage." Tudor Ex. 17.

Defendants GM, DCX, and Ford agreed that they would not grant Plaintiffs data requests unless Plaintiff agreed to their anticompetitive conditions for a business arrangement. Pl.'s Mem. at 12. For example, Defendants noted that, as a result of the "unified" front of GM, Ford and DCX, Plaintiff "will do anything we want[]." Miller Ex. 15. Moreover, because Defendants were unable to coerce Plaintiffs management into acceding to their demands, Defendants engaged in a "divide and conquer" strategy by approaching the senior executives of Plaintiffs parent companies. Id. For instance, Mr. John Smith (GM) called Mr. Lloyd Waterhouse (Reynolds) and stated, that if, Plaintiffs founders continued to support Plaintiff as a competitor of Marmaduke/OEC, then "we will not provide the parts data." Waterhouse Dep. 68-77. Furthermore, at a December 14, 2000 meeting with Plaintiff, Mr. Smith further stated (in the presence of Ford and DCX representatives) that GM would maintain its position in withholding Parts Data from Plaintiff. Galbato Dep. 546.

Plaintiff alleges that it requested Parts Data from each Defendant. Pl.'s Mem. at 11. Following each request, however, Plaintiff was informed that Defendants GM, Ford and DCX would continue to withhold Parts Data (refusal to provide Parts Data was confirmed on September 11, 2000 and October 5, 2000). Galbato Dep. 264-66.

(ii) Circumstantial Evidence of Conspiracy

Plaintiff alleges that, in addition to the above-reference direct evidence, circumstantial evidence of a conspiracy exists that demonstrates that Defendants conspired to withhold Parts Data. Pl.'s Mem. at 15. Plaintiff argues that proof of a conspiracy may be established by "circumstantial evidence that reasonably tends to prove that [the parties] had a conscious commitment to a common scheme designed to achieve an unlawful objective." Monsanto Co. v. Spray-Rite Serv. Corp., 465 U.S. 752, 768 (1984). Moreover, to prove a conspiracy based on circumstantial evidence, a plaintiff must prove evidence of parallel conduct by the defendants, together with one or more "plus factors." Petruzzi's IGA Supermarkets v. Darling-Delaware Co., Inc., 998 F.2d 1224, 1232 (3rd Cir. 1993). "Plus factors," for example, can include pretextual explanations of a defendant's conduct. Id.

Plaintiff asserts that Defendants GM, Ford, and DCX have engaged in parallel conduct by refusing to grant it Parts Data licenses.*fn4 Pl.'s Mem. at 16. Moreover, GM, Ford, and DCX gave the identical Parts Data (that Plaintiff requested) to both OEC and other independent businesses whose activities do not involve parts locator services. Id. Furthermore, most other major automobile manufacturers have provided Parts Data to Plaintiff. Id. Plaintiff, thus, asserts that Defendants have engaged in a common scheme, in that, they have agreed to withhold Parts Data. Id.

Plaintiff further argues that Defendants' reasons for their refusal to provide Plaintiff with Parts Data are merely pretextual ("plus factor"). Pl.'s Mem. at 17. Plaintiff alleges pretextual behavior on the part of each Defendant. Id. at 17-18. Plaintiff, therefore, asserts that Defendants' parallel conduct in refusing to grant it Parts Data licenses as well as their pretextual reasons given for refusing ...

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