Six automotive dealerships in South Carolina have initiated legal action against Reynolds and Reynolds, claiming the company secured an unauthorized 66-month extension on their dealer management system contracts. The lawsuit, filed this week, centers on whether a specific manager had the power to bind multiple stores to the extended term.
According to the complaint, Reynolds provided DMS services to the dealerships for years before the extension was executed. The dealers argue that the individual who signed the document only had authority over his own location and could not commit other stores to a long-term technology agreement. Reynolds has reportedly maintained that the extension remains valid.
The duration of the contract is a central point of contention. While standard Reynolds agreements typically last three to five years with four percent annual cost increases, this extension adds another 5.5 years to the existing terms. The dealerships contend that this length is unusual and effectively locks them into escalating fees for nearly a decade.
Reynolds and its primary competitor, CDK Global, control approximately 70 percent of the U.S. franchise DMS market. Both companies previously settled antitrust class actions regarding alleged price-fixing, with Reynolds paying $29.5 million and CDK paying $100 million. Both firms denied any wrongdoing during those settlements.
The legal dispute highlights broader concerns about market concentration and vendor lock-in in the automotive software industry. Dealers note that the combination of long contracts, annual cost escalators, and fees for third-party integration systems creates a closed ecosystem that makes switching platforms difficult and expensive.
