H & R Block faces federal antitrust lawsuit to block TaxACT acquisition

The planned acquisition of the Cedar Rapids company that publishes TaxACT software by tax preparation giant H&R Block faces Justice Department opposition.

H&R Block announced an agreement to purchase all the outstanding shares of 2SS Holdings Inc. of Cedar Rapids for $287.5 million in cash on Oct. 13, 2010.

The United States Department of Justice said Monday that such a purchase would be harmful to consumers.

“The combination of H&R Block and TaxACT would likely lead to millions of American taxpayers paying higher prices for digital do-it-yourself tax preparation products,” said Christine Varney, Assistant attorney general in charge of the Department of Justice's Antitrust Division.

“In addition, TaxACT has aggressively competed in the digital do-it-yourself tax preparation market with innovations such as free federal filing," Varney said. "If this merger is allowed to proceed, that type of innovation will be lost.”

Varney told reporters in a press conference that there are only three major competitors in the digital software market, and only two would remain following the proposed merger. She pointed to statements made by H&R Block executives that benefits for the company of the merger included eliminating a competitor and gaining more control over pricing.

About 70 employees work for 2SS Holdings, mostly in Cedar Rapids. The company offers online, desktop download and professional filing software, but the vast majority use its service to file online.

U.S. Sen. Chuck Grassley, R-Iowa, had spoken in support of the merger, saying it would be good news in Cedar Rapids. He had expressed hope that it would lead to job creation in Cedar Rapids and help the community's recovery from the massive 2008 flood.