United States v. H & R Block, Inc.
833 F. Supp. 2d 36
D.D.C.2011Background
- DOJ seeks to block HR Block’s acquisition of TaxACT under Section 7 of the Clayton Act; trial court enjoined the merger after bench trial; Merger involves digital do-it-yourself (DDIY) tax prep firms—HR Block, TaxACT, and Intuit (TurboTax) dominate the DDIY market.
- DDIY market shares (2010 data) show Intuit ~62.2%, HRB ~15.6%, TaxACT ~12.8%; next competitors are TaxHawk and TaxSlayer.
- TaxACT operates under a freemium model with free federal returns and paid add-ons; HRB and Intuit have historically used Free File Alliance (FFA) to promote free online filing.
- IRS Free File Alliance and related free offers shaped competitive dynamics and pricing, with IRS restricting broad free-for-all offers over time; this context is central to evaluating post-merger competition.
- Court held the relevant market is the DDIY market (not all tax preparation methods), rejected including assisted or pen-and-paper as part of the market, and found the market highly concentrated (HHI well over 4,000) supporting anticompetitive concerns.
- The court conducted extensive analyses (documentary evidence, expert testimony, and merger simulations) and found likely unilateral and coordinated anticompetitive effects absent merger-specific efficiencies that are verifiable and merger-specific.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| What is the relevant product market for the merger? | DOJ argues market = all DDIY products. | HRB/TaxACT argue broader market includes all tax prep methods. | DDIY market defined; narrower market rejected as overbroad. |
| Would the merger likely lessen competition in the defined market? | Combination creates a duopoly with Intuit; high HHI and market share increase. | Barriers to entry/expansion could offset anticompetitive effects; entry by TaxSlayer/TaxHawk possible. | Yes; prima facie case shown; likely anticompetitive effects. |
| Are coordinated effects likely post-merger? | Coordination possible due to market concentration and past cooperation to limit free offerings. | Competition persists; market dynamics and differences in products hinder coordination. | Coordinated effects likely; merger supports tacit/collusive dynamics. |
| Do merger-specific efficiencies rebut the presumption of anticompetitive effects? | Efficiencies claimed by HRB not merger-specific or verifiable; unlikely to offset harm. | Efficiencies would improve competition and lower prices. | Efficiencies not proven merger-specific or verifiable; cannot rebut presumption. |
Key Cases Cited
- United States v. Baker Hughes Inc., 908 F.2d 981 (D.C. Cir. 1990) (establishes Baker Hughes framework for Section 7 analysis)
- Brown Shoe Co. v. United States, 370 U.S. 294 (1962) (test for market definition via hypothetical monopolist and substitutes)
- FTC v. H.J. Heinz Co., 246 F.3d 708 (D.C. Cir. 2001) (reiterates SSNIP and market power approach; coordination concerns)
- United States v. Sungard Data Systems, Inc., 172 F. Supp. 2d 172 (D.D.C. 2001) (analytical approach to Section 7; effect of vertical integration discussed)
- United States v. Oracle Corp., 331 F. Supp. 2d 1099 (N.D. Cal. 2004) (unilateral effects framework in differentiated markets)
- CCC Holdings, Inc., 605 F. Supp. 2d 26 (D.D.C. 2009) ( Merger Guidelines reference on coordinated and unilateral effects)
- FTC v. Swedish Match, 131 F. Supp. 2d 135 (D.D.C. 2000) (use of switching/diversion data in market analysis)
- Philadelphia National Bank, 374 U.S. 321 (1963) (monetary standards for concentration considerations)
- Whole Foods Mkt, LLC v. FTC, 548 F.3d 1025 (D.C. Cir. 2008) (submarket distinctions; market boundaries with product characteristics)