Copart Files Antitrust Lawsuit Against Auto Auction Services Corp.

FAIRFIELD, Calif. -- Copart, Inc. (NASDAQ:CPRT), a leading online vehicle remarketing company, filed an antitrust lawsuit yesterday alleging that Auto Auction Services Corporation (AASC) is restraining competition and stifling innovation by denying Copart access to an essential electronic network called AutoIMS.

AutoIMS is an electronic vehicle inventory management system used by vehicle sellers such as banks, finance companies, and fleet operators to assign vehicles to auction companies across the United States using a single system and interface. AutoIMS is owned and operated by AASC, which in turn is owned and controlled by a consortium of major vehicle remarketing firms which compete with Copart, including Manheim Auctions, Inc., ADESA, Inc., and other members of the National Auto Auction Association.

A vehicle remarketing company like Copart must have access to AutoIMS in order to receive and accept assignments of vehicles for resale from banks, finance companies, and fleet operators. Yet when Copart recently requested access to AutoIMS in order to effectively compete in that market, AASC insisted Copart pay discriminatory access fees, including an initiation fee of $50,000 per location. Because Copart operates over 130 locations in North America, that fee would exceed $6.5 million - a discriminatory demand that is equal to denying access altogether.

Copart also claims that other companies in direct competition with Copart such as Manheim and ADESA paid a nominal initiation fee for access to AutoIMS.

"Because our company has proven to be such a successful innovator in the auto-remarketing industry, AASC is trying to keep us from being able to effectively compete with the companies that own and control AASC," said Copart CEO and Founder Willis J. Johnson. "This is unfair to customers, who deserve to have all choices available to them, and it is anti-competitive."

Copart has built a name for itself based on innovation. Johnson founded the company in 1982 by purchasing one salvage auction facility in Vallejo, CA. Since then, Johnson has consistently looked for ways to improve the industry through technology and advanced services. That innovation has allowed him to grow the company to more than 140 locations in the United States, Canada and United Kingdom.

One of Copart's most significant innovations was the development of VB2, a patented internet-based sales platform that breaks down geographical barriers and allows buyers from all over the world to compete online for vehicles in an auction-like environment. Currently Copart has more than 100,000 buyers from 94 countries that can purchase vehicles using VB2, allowing the company to sell more than 1 million vehicles every year.

Copart recently expanded its focus beyond salvage sales to also include whole car remarketing for banks, finance companies, and fleet operators, looking to compete head-to-head with the two largest competitors for that business - Manheim and ADESA. Copart's suit alleges its efforts to offer its innovative online technology to that market are being thwarted by the refusal of AASC to allow Copart access to AutoIMS on fair and nondiscriminatory terms.

"We believe the customers should be the ones to decide - not our competitors," Johnson said. "It is not in our competitors' best interest to have Copart be on an even playing field with them. But it is in the customer's best interest."

The suit was filed in the U.S. District Court for the Northern District of California.

Copart, founded in 1982, provides vehicle suppliers, primarily insurance companies, with a full range of remarketing services to process and sell salvage vehicles, principally to licensed dismantlers, rebuilders and used vehicle dealers, through Internet sales utilizing its proprietary VB2 technology. Salvage vehicles are either damaged vehicles deemed a total loss for insurance or business purposes or are recovered stolen vehicles for which an insurance settlement with the vehicle owner has already been made. Copart also remarkets non-damaged vehicles for banks, finance companies, fleet operators, dealers, and the public. The Company currently operates 146 facilities in the United States, Canada and the United Kingdom.

Cautionary Note About Forward-Looking Statements

This press release contains forward-looking statements within the meaning of federal securities laws, including statements relating to the merits of pending litigation and statements concerning Copart's business and entry into car remarketing for banks, finance companies, and fleet operators. These forward-looking statements are subject to substantial risks and uncertainties. In particular, the litigation described above is in the very preliminary stages, and we cannot predict the course or outcome of the litigation with any certainty. Litigation can be time-consuming and expensive, could have an adverse effect on our operating results, and could result in counter-claims against Copart. If we are not successful in the litigation, it could also have a material and adverse effect on our strategies in the whole-car remarketing market. Even if we were successful in the litigation, entering new markets and businesses exposes us to various risks. We have limited experience in whole-car remarketing and cannot predict whether we will be successful or whether our existing businesses will complement our car remarketing strategy. In addition, our revenues, operating results, financial condition, and growth rates are subject to numerous other risks, including our ability to complete and integrate new acquisitions, environmental and regulatory risks, and the other factors described under the caption "Risk Factors" in our Annual Report on Form 10-K and Quarterly Reports on Form 10-Q. We encourage investors to review these disclosures carefully.