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The U.S. Department of Justice (DOJ) filed a complaint to prevent H&R Block, Inc. (NYSE:HRB), the largest U.S. preparer of taxes, from acquiring 2SS Holdings Inc, the developer and owner of TaxACT, a digital tax preparation business. The claim alleges that the acquisition is anticompetitive. Last October, H&R Block agreed to acquire the TaxACT in a deal worth $287.5 million.
The antitrust division of the DOJ argues that the transaction may lead to higher prices, lower quality and also impede innovation regarding do-it-yourself tax preparation products. The claim alleges that TaxACT has aggressively competed in the digital do-it-yourself tax preparation market with innovations such as free federal filing, and that this merger inhibits such innovation.
H&R Block's President and CEO, William C. Cobb, responded that "We continue to believe this merger makes sense, is pro-competitive and will greatly benefit consumers." HRB offers their At Home do-it-yourself software, but the company has been losing market share to TaxACT and TurboTax, which is owned by Intuit Inc. (NASDAQ:INTU).

Jackson Hewitt Tax Service Inc. (JHTX.PK) has also been losing market share and announced on Tuesday, May 24, that it filed for Chapter 11 protection. The pre-packaged bankruptcy filing by Jackson Hewitt will likely strengthen the DOJ's claim against consolidation, as a large competitor may also be exiting the business. This bankruptcy filing could also, at least partially, indicate that H&R Block's buying TaxACT inidcates a need to comepete within the digital innovation of tax preparation, where the growth and competition exists.

The claim alleges that TaxACT regularly expanded free versions of its filing software, forcing its competitors to improve their competing products. Under HRB’s announced acquisition plans, the TaxACT management team in Cedar Rapids, Iowa, would continue to run the product. Nonetheless, the DOJ alleges that HRB employees have flaunted in presentations and emails that the acquisition will eliminate a competitor and help regain control of pricing. The DOJ declined to disclose the source of this information until doing so in court.
Source: Government's H&R Block Complaint Complicated by Jackson Hewitt Bankruptcy