The Department of Justice has blocked the proposed merger between H&R Block and TaxACT on the grounds that combining the two tax-software giants would “substantially lessen competition in the tax preparation software market, resulting in higher prices, lower quality, and reduced innovation,”

According to DOJ Assistant Attorney General Christine Varney, about 40% of taxpayers use tax-prep software, and 90% of the market is controlled by Block, TaxACT and Quicken.

William C. Cobb, H&R Block’s president and CEO, responded: “We’re especially disappointed with this decision knowing that the DOJ rejected guarantees that we would not raise TaxACT’s prices.”

Cobb insisted that shrinking the number of companies serving the market would lead to “enhanced functionalities [that] would create a more competitive landscape for tax preparation.” The merger plan was originally announced in October 2010.Block says it will “explore all legal options” to address the merger.

DOJ halts proposed merger of H&R Block and TaxACT – May. 23, 2011 [CNN]
H&R Block Responds to DOJ Decision on TaxACT Merger [TMC Net]

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