The Justice Department’s Antitrust Division has been on a litigation binge lately. One new case involves a challenge to the proposed merger of H&R Block and TaxACT, two of the three largest tax preparation companies in America. Division boss Christine Varney gave a lengthy spiel about the need for competition in this oh-so-important market:
This morning, the Department filed an antitrust lawsuit in U.S. District Court in Washington, D.C., to prevent H&R Block from acquiring TaxACT. We are blocking this transaction because the proposed merger would substantially lessen competition in the tax preparation software market, resulting in higher prices, lower quality and reduced innovation.
Between 35 and 40 million taxpayers use software products to prepare and file their federal and state income taxes. Three companies account for 90 percent of all sales of consumer tax software products. Combining H&R Block and TaxACT would destroy the head-to-head competition between these two companies, leaving only one other major competitor.
Despite Varney’s typical economic ignorance about how competition actually works — she can’t fathom a yet-unknown competitor entering the market — it’s hard for even me to get worked up over a case involving a market that wouldn’t exist in the first place if not for the state. After all, people buy tax preparation software because (1) they are forced to pay taxes and (2) the government has made tax rules too complicated for most people to understand without outside assistance. If Varney really wanted to help consumers, she’d either demand Congress and the IRS simplify the current income tax, or better yet, abolish it altogether.