Justice Sues to Block H&R Block Acquisition of TaxACT

Anti-trust lawyers at the U.S. Justice Department have filed suit in federal court to block H&R Block from purchasing a company that makes TaxACT, a popular tax-preparation software.

In a conference call with journalists today, Assistant Attorney General Christine Varney said there is not enough competition in the tax preparation field to allow the merger to go forward. H&R Block is the nation's largest tax preparer.

Making the case

Varney said H&R Block, in its public comments on the proposed deal, actually makes the government's case. She notes that Block said one of the primary reasons for the acquisition was to eliminate a competitor.

“In discussing the acquisition, H&R Block noted that one of the 'strategic opportunities' of the deal was to 'acquire TaxACT and eliminate the brand to regain control of industry pricing and further price erosion.'”, Varney said. “We believe that these statements clearly reveal that TaxACT is a formidable competitor that is being acquired in order to thwart competition in the tax software market.”

Over the years, H&R Block has produced a number of complaints to ConsumerAffairs.com, including complaints about tax preparation fees. Barbara, of New York, said she got into a heated argument with the manager of one H&R Block store after she said she caught the store double-billing.

“The manager lowered the fee from $800 to $660. still almost $200 more than I paid last year,” Barbara told ConsumerAffairs.com. “I have a simple return.”

Millions use tax preparation software

An estimated 35 to 40 million taxpayers use software products to prepare and file their federal and state income taxes. Varney said three companies account for 90 percent of all sales of consumer tax software products. Combining H&R Block and TaxACT, she said, would destroy the head-to-head competition between these two companies, leaving only one other major competitor.

According to the government, TaxACT is known as a maverick in the industry.  Its conduct over the past several years has significantly disrupted the market and forced its competitors, including H&R Block, to lower prices, increase quality and continue to innovate.

In other words, it has been good for consumers. TaxACT was the first company to offer all taxpayers the ability to prepare and electronically file their federal individual tax returns for free directly from its website.  Due to that competition, H&R Block felt significant pressure to offer a free product to consumers, Varney said.

Also, TaxACT has benefited consumers in another significant way – it offered lower prices at retail stores. Its desktop software is offered through a major retailer at a lower price than the comparable products from H&R Block and Intuit Varney said TaxACT did not charge an additional fee to its customers to e-file their state returns and did not attempt to sell users additional features after purchase.