The US Department of Justice has announced Credit Karma must divest its tax business to Square, if it wishes to complete its $7.1bn acquisition by Intuit.
Without this divesture, the Department of Justice believes the transaction would “substantially lessen competition for digital do-it-yourself (DDIY) tax preparation products.”
A civil antitrust lawsuit was filed by The Justice Department’s Antitrust Division to block the acquisition of Credit Karma. However, it also issued the proposed settlement to resolve the issue.
Delaware-based Intuit offers tax preparation, accounting, payroll, and personal finance solutions to individuals and small businesses. Its TurboTax business is the largest provider of DDIY tax preparation products for US federal and state tax returns, the regulator claims.
Justice Department Antitrust Division assistant attorney general Makan Delrahim said, “Intuit’s TurboTax has long led the market for digital do-it-yourself tax filing services, but disruptive competition from Credit Karma Tax has brought substantial benefits to American taxpayers.
“Today’s divestiture to Square, another highly successful and disruptive fintech company, ensures that taxpayers will continue to both benefit from this competition and benefit from new innovative financial service offerings from both Intuit and Square.”
The issued compliant claims TurboTax has held a dominant position in the DDIY tax preparation market for the last decade. Credit Karma, which offers customers access to free credit scores, credit monitoring, and DDIY tax preparation tools, has been a major competitor.
By combining Credit Karma and Intuit, the regulator fears it would eliminate competition and could result in higher prices.
Square is a consumer financial services and tools developer which builds a range of peer-to-peer money transfer services, debit card products and more.
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