Carfax, a company that gives consumers the tools they need to make informed buying choices when it comes to both new and used cars, announced last week that they paid $480 million to purchase the Canadian version CarProof.
IHS, the owner of Carfax, purchased the company as a part of a 1.4 billion dollar acquisition in 2013. It is currently operated in the former automotive industry maker land of Detroit.
CarProof, based in Ontario, is a company that is similar to the American owned Carfax. It gives consumers and dealers reports about cars ownership and vehicle history.
The plan is to combine the two companies to come up with a standardized conglomerate that gives owners, even more, crucial information about car ownership and background. Looking forward, they want to grow the business and expand it so that it can help to accelerate the needs of the growing customer base.
Before Carfax reports, there was no standardization of reports for consumers and car dealers alike. An honor system type system, a car owner could tell the dealer whatever they wanted about the vehicle history, whether it had been in an accident or not, or any other issues the car may have.
Not being responsible for telling the truth, it led to a used car industry that was fraught with rebuilt engines, cars that were not suitable for the road, cars that had been previously salvaged and ones that had even been in flood zones and junked.
Carfax was an innovative idea that gave everyone the tools to be a more informed consumer and better with their vehicle insurance. Not only providing more fairness and honesty in car buying, but they have also probably saved countless lives by taking dangerous cars off of the road. Their reports also can alert someone when a car has something that has been recalled to ensure that the correct repairs have been made.
The buyout has allowed Carfax to not only have a foothold in the US but now it will corner the Canadian market as well. Not only supplying the consumer with information, the two companies together can release valuable information to law enforcement and insurers as well. Revolutionizing the car buying industry, it is a tool that has more worth than anyone ever imagined. Perhaps that is why they paid $480 million for Carproof Corp.
Carfax recently had a federal lawsuit waged against it. The case involved accusations of antitrust law violation and anti-competitive practices. Damages being sought of over $50 million dollars is just a small drop in the bucket to Carfax. At issue was whether Carfax perpetuated a monopolization due to their agreements with websites, classifieds, and auto companies.
Lawyers for the other side insist that Carfax provides classified sites and automakers both non-cash and cash marketing for making exclusive agreements with them only. Carfax is one of the priciest vehicle reports generated to date, and with the name brand and reputation, they are shutting less expensive alternatives out of the market.
When Carfax makes an agreement with an auto manufacturer, the dealers are then forced to purchase car report histories only from them directly. Reports can cost a dealership as much as $1500 or more per month. A hefty dig to the pocketbook, dealerships have no choice in the matter but are forced to pay. There are many other vehicle histories reports that you have probably not heard of. The reason? Lawyers would insist it is due to monopoly practices perpetuated by carfax.
Bringing in this new company will likely only add fuel to the monopoly fire. Not only will they have an alleged monopoly in the US, but they are also expanding to Canada, which is bound to cause a backlash in Canadian dealerships too. There has been no resolution to any of this, and Carfax continues to have a grip on the vehicle history market.
With so many things in the works, Carfax definitely got its money’s worth when they purchased the Canadian version. Not only buying into the brand, they now have the entire Canadian market to monopolize. What lays ahead for them in court and revenue is anyone’s guess, but the allegations against them haven’t seemed to do much to tarnish their vehicle record business.