The U.S. Justice Department filed a lawsuit Monday to prevent H&R Block Inc from acquiring 2SS Holdings Inc, developer of the TaxACT digital tax preparation business, because it would hurt competition.
H&R Block, the largest U.S. tax preparer, agreed to acquire the company last October in a deal worth $287.5 million. The company had previously estimated that the deal would have increased its earnings per share by 5 cents.
However, the Justice Department's antitrust division said the transaction would have led to higher prices, hurt innovation and reduced product quality for those who wanted to do their own taxes.
"TaxACT has aggressively competed in the digital do-it-yourself tax preparation market with innovations such as free federal filing," said Christine Varney, assistant attorney general for the Justice Department's antitrust division.
"If this merger is allowed to proceed, that type of innovation will be lost," she said in a statement.
An H&R Block spokeswoman was not immediately available for comment.
The Justice Department accused H&R Block of touting that the acquisition would eliminate a competitor and help "regain control of industry pricing and further price erosion."
The company's online tax-preparation services, H&R Block At Home software, competes with Intuit Inc's TurboTax software, which is gaining market share from H&R Block and with No. 2 player Jackson Hewitt Tax Service Inc as more people move to "do-it-yourself" models.
H&R Block shares were down 45 cents to $15.88 in morning trading on the New York Stock Exchange.