On Wednesday at the District of Columbia District Court, the United States filed a complaint against Intuit Inc. and Credit Karma Inc. to prevent Intuit from acquiring Credit Karma, claiming the acquisition would decrease competition in the market for self-tax-filing services and violate the Clayton Act.
As the market for “digital do-it-yourself” (DDIY) tax filing services go, TurboTax, which is owned by Intuit, is the most popular; as such, Intuit owns 66% of the market, according to the complaint. In 2017, Credit Karma, which had been operating as a personal finance platform since 2008, launched a free DDIY tax preparation product and became a competitor to Inuit. According to the complaint, after its first tax season, it rose to the fifth-largest DDIY tax preparation product and, in 2020, had more than two million people use it to file their taxes.
The U.S. contended that the competition Credit Karma has brought to the DDIY tax filing services market has benefited the millions of Americans who file their taxes each year because not only is there a product that is always free in the market, Credit Karma, but Inuit has lowered their prices and “increased the quality of some of its products.” Although there are DDIY tax filing products that own more of the market than Credit Karma, Credit Karma has been the most recently disruptive to the market because of its free nature, the complaint said.
On Feb. 24, 2020, Inuit proposed the acquisition of Credit Karma for around $7.1 billion.
If Inuit acquires Credit Karma, according to the United States, it is likely to decrease competition and innovation in the market, as well as raise prices while reducing quality for consumers of DDIY tax filing services. Section 7 of the Clayton Act works to prevent acquisitions or mergers that could “substantially … lessen competition, or to tend to create a monopoly”; the U.S. alleged that Inuit’s proposed acquisition would violate Section 7.
The government requested that the court deem the acquisition to be in violation of Section 7 of the Clayton Act; enjoin the defendant from acquiring Inuit or entering into a merger or other such agreement with Credit Karma; compensate the U.S. for the costs of the legal action; and grant any other relief deemed reasonable by the court.
