Government Forces Showdown over H&R Block Merger with TaxAct
by AccountingWEB on
By Ken Berry
The government is seeking to block a proposed merger by H&R Block, the country's largest tax preparation firm, in its first antitrust action in seven years (U.S. v. H&R Block, Inc., 1:11-cv-00948, U.S. District Court, District of Columbia). The outcome will likely resonate loudly throughout the industry.
The lawsuit is seen as a litmus test for the challenge to an even bigger merger between AT&T and T-Mobile. "It doesn't matter whether it's a relatively small transaction or a transaction involving billions of dollars, the law should be applied the same way," said Joseph Wayland, deputy head of the Department of Justice Antitrust Division. "This merger totally lacks any redeeming features." The last time the department tried a merger case was in 2004, when it failed to block Oracle Corporation's $8.4 billion purchase of PeopleSoft Inc.
The trial began on September 6, and closing arguments were heard on October 3. The presiding district court judge in Washington, DC, Judge Beryl Howell, expects to reach a decision by the end of the month.
Here's what's at stake: Last year, H&R Block announced a $287.5 million acquisition of 2SS Holdings Inc., the maker of TaxAct software. The proposed acquisition would eliminate the firm that had aggressively competed with H&R Block in the do-it-yourself tax preparation market, mainly through lower pricing and product innovation.
According to the Justice Department, as many as 40 million taxpayers used software to prepare and file their tax returns in 2010. It says that three companies account for 90 percent of all sales of digital, do-it-yourself tax preparation products. The purchase of TaxAct by H&R Block would combine the second- and third-largest providers of these products.
This would leave H&R Block and Intuit as the two major players in the marketplace. Intuit produces TurboTax, the most widely used digital and online software for tax preparation. It's suspected that the proposed merger could result in higher prices for consumers.
For its part, H&R Block points out that the tax preparation industry includes more than seventeen competitors. It also referred to the Internal Revenue Service (IRS)-sponsored Web site that promotes competition and offers free services to the public.
To prove that the deal violates antitrust law, the government must effectively show that the merger may reduce competition. The size of the H&R Block acquisition shouldn't matter in the determination of potential harm to consumers. Interested observers, including most members of the accounting profession, are awaiting the outcome.
- Federal Lawyers Block Oracle Takeover of PeopleSoft
- Tax-Prep Software Is Good, But Taxpayers Still Need a CPA
You may like these other stories...
OECD calls for coordinated fight against corporate tax avoidanceDavid Jolly of the New York Times reported that dozens of countries with the most advanced economies have agreed on principles for concrete action to prevent...
Plan ahead before you buy some shares in a stock mutual fund near yearend, when the fund is about to pay a dividend. It might be better to wait until after the fund goes "ex-dividend," that is, wait until after the...
AgFeed agrees to pay $18 million to settle SEC accounting fraud caseMichael Rapoport of the Wall Street Journal reported on Monday that AgFeed Industries Inc. has agreed to pay $18 million to settle US Securities and...
Upcoming CPE Webinars
In this jam-packed presentation Excel expert David Ringstrom, CPA will give you a crash-course in creating spreadsheet-based dashboards. A dashboard condenses large amounts of data into a compact space, yet enables the end user to easily drill down into details when warranted.
This webcast will include discussions of important issues in SSARS No. 19 and the current status of proposed changes by the Accounting and Review Services Committee in these statements.
Amber Setter will show the value of leadership assessments as tools for individual and organizational leadership development initiatives.
Many Excel users have a love-hate relationship with workbook links. For the uninitiated, workbook links allow you to connect one Microsoft Excel spreadsheet to other spreadsheets, Word documents, databases, and even web pages.