## Facts

- The United States, through the Department of Justice Antitrust Division, sued to block H & R Block, Inc.’s proposed acquisition of 2SS Holdings, Inc. (TaxACT), a seller of digital do-it-yourself (DDIY) tax preparation software.
- The government alleged a relevant market of U.S. DDIY tax preparation products used by tens of millions of taxpayers.
- In that market, Intuit (TurboTax), H & R Block, and TaxACT were the three largest firms, collectively holding about 90% of sales.
- TaxACT competed aggressively through free and low-priced products and was characterized as a disruptive “maverick” that constrained larger rivals’ pricing and offerings.
- The proposed transaction would combine the second- and third-largest DDIY providers, leaving Intuit and H & R Block as the only substantial competitors.
- The government sought injunctive relief under § 7 of the Clayton Act; after a bench trial, the court issued a memorandum opinion enjoining the merger.

## Issues

1. Whether the relevant product market was limited to digital do-it-yourself tax preparation products, as opposed to including assisted preparation and other tax-filing alternatives.
2. Whether the relevant geographic market was nationwide.
3. Whether the acquisition was likely to substantially lessen competition by increasing concentration and creating an anticompetitive duopoly.
4. Whether elimination of TaxACT as a “maverick” competitor would likely lead to higher prices, reduced free offerings, or reduced innovation.
5. Whether timely, likely, and sufficient entry or expansion, or merger-specific and verifiable efficiencies, rebutted the government’s prima facie case.

## Decision

- The court held that the United States proved the acquisition was likely to substantially lessen competition in violation of § 7 of the Clayton Act.
- The court defined the relevant product market as U.S. digital do-it-yourself tax preparation products and accepted a nationwide geographic market.
- The court found the merger would significantly increase concentration and result in an anticompetitive duopoly between H & R Block and Intuit.
- The court credited evidence that TaxACT’s competitive role constrained rivals and that its removal would likely lead to higher prices, weaker free offerings, and reduced innovation.
- The court found potential entry or expansion insufficient to prevent competitive harm within a relevant time frame.
- The court concluded defendants’ claimed efficiencies were not adequately merger-specific and verifiable to offset likely anticompetitive effects.
- The court granted injunctive relief and enjoined consummation of the merger.

## Legal Principles

- Section 7 of the Clayton Act prohibits acquisitions where the effect “may be substantially to lessen competition” in any line of commerce in any section of the country.
- A merger that materially increases concentration in a properly defined relevant market may be presumed likely to lessen competition, consistent with structural analysis reflected in merger enforcement standards.
- Identification of a relevant product market turns on reasonable interchangeability and practical indicia of distinct competitive interaction; a relevant geographic market may be nationwide when competitive conditions do not materially vary by location.
- Elimination of a disruptive rival that constrains pricing and product strategy can support a finding of likely competitive harm, including non-price effects such as reduced free options and diminished innovation.
- Entry and expansion rebut a prima facie case only when shown to be timely, likely, and sufficient to counteract the merger’s competitive effects.
- Efficiencies may rebut predicted harm only when adequately supported, verifiable, and merger-specific, and when they would prevent the merger from substantially lessening competition.

## Conclusion

The court enjoined H & R Block’s acquisition of TaxACT after finding a relevant nationwide market for digital DIY tax preparation products and concluding the transaction would combine the second- and third-largest competitors, eliminate a disruptive rival, and likely lead to an anticompetitive duopoly with higher prices and reduced consumer benefits.


United States v. H & R Block, Inc., 833 F. Supp. 2d 36 (D.D.C. 2011)