The H&R Block matter was a Horizontal Merger challenge under Section 7 of the Clayton Act arising from H&R Block’s proposed $287.6 million acquisition of TaxACT (2SS Holdings), a competing provider of digital do-it-yourself (“DDIY”) tax-preparation software. H&R Block and TaxACT were the second- and third-largest competitors in the DDIY tax-preparation market. Together with Intuit’s TurboTax, the three firms accounted for more than 90 percent of the market.
The Antitrust Division of the U.S. Department of Justice (“DOJ”) alleged that the acquisition would substantially lessen competition by eliminating rivalry between H&R Block and TaxACT and increasing the likelihood of coordinated conduct between the two remaining suppliers, H&R Block and Intuit. Applying the structural framework of the 2010 Horizontal Merger Guidelines, the Court found the DDIY tax-preparation market highly concentrated and held that the resulting concentration established a rebuttable presumption of illegality. To rebut that presumption, the defendants asserted that the merger would generate substantial, merger-specific cost savings.
On behalf of DOJ, Professor Zmijewski, supported by Pavel Nikolov, analyzed the cost-saving efficiencies the defendants claimed would result from the merger. Applying the verification framework historically accepted by the courts—which considers documentation, factual foundation, and methodology—Professor Zmijewski evaluated the claimed cost savings and whether they were merger-specific. He evaluated whether the asserted efficiencies relied on independently verifiable evidence and whether the claimed savings were achievable through the parties’ own standalone plans without the merger.
The Court found that the asserted efficiencies were “either not merger-specific or not verifiable.” The Court also observed that efficiencies H&R Block had predicted in a prior acquisition had not materialized, reinforcing the need for efficiencies to be supported by independently verifiable evidence.