Justice files to block H&R Block's purchase of TaxACT

William Cobb, H&R Block's chief executive, called the suit an attempt to "stifle smart business growth" in a Monday statement and said Justice's decision came after his company guaranteed that it would not raise TaxACT's prices. 

"Contrary to the DOJ’s position, the synergies and enhanced functionalities realized from this merger would create a more competitive landscape for tax preparation," Cobb said in a statement. "We continue to believe this merger makes sense, is pro-competitive and will greatly benefit consumers."

The new lawsuit also comes not long after Justice threatened an antitrust suit that prompted Nasdaq and IntercontinentalExchange to scuttle their bid for NYSE Euronext. 

According to Justice, between 35 million and 40 million taxpayers use digital tax preparation products, either online or through standalone software. 

The Justice Department said in a release on the suit that allowing the purchase would also impede competition by making it easier for H&R Block and Intuit to consult in areas like prices and quality. H&R Block agreed to buy 2SS in October for $287.5 million. 

For her part, Varney said in her conference call that TaxACT had been a “maverick” in the digital tax preparation sector by lowering prices at retail stores and being the first company to allow users to file free federal returns from its website. 

“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,” Varney added. 

In the communications cited by Justice, H&R Block said a primary benefit of its purchase was “elimination of a competitor” and that buying up TaxACT would help “regain control of industry pricing and further price erosion.”

An internal H&R Block email also signaled that Intuit and H&R Block would control 84 percent of the digital market, post-purchase. “We both obviously have great incentive to keep this channel profitable,” the email said.

This post was updated at 6:09 p.m.