The Silicon Valley-based Credit Karma, which was founded in 2007, said it has in excess of 100 million users, about twice as many as Intuit. The FinTech startup offers free credit scores, credit card applications, loans and savings accounts.
As the leader in DIY taxes, TurboTax has been dealing with escalating competition from Credit Karma, which is now a leading financial app among younger customers. Credit Karma started offering a free tax filing service in 2017.
Several legal experts have said the agreement raises serious antitrust concerns. Some have pointed to a similar attempt by H&R Block in 2011, when it tried to purchase another DIY tax software company. Regulators blocked the deal from going through.
Bloomberg Intelligence Analyst Julie Chariell said Intuit is the biggest DIY tax filing software provider in the U.S. It shares about 80 percent of the market with H&R Block.
Credit Karma’s tax filing market share is growing at a rate of 3 percent. Its free tax preparation business grew by about 50 percent last year, the company said.
“There’s no question the acquisition could and should face scrutiny,” said Aaron Edlin, a law and economics professor at the University of California at Berkeley. “There’s a huge concern when the leading firm in an industry such as tax software buys another firm that is competitive, particularly [one] that’s offering free tax software.”
Eleanor Fox, a law professor at New York University, said regulators wouldn’t just be looking at the companies’ size, but could also be concerned about whether the deal is “cornering a market.”
Former Justice Department lawyers told ProPublica that the deal should be probed as a possible breach of antitrust law. “Allowing a near-monopolist to eliminate a maverick competitor poses obvious risks of harm,” said John Newman, a former DOJ Antitrust Division trial attorney who is now a law professor at the University of Miami.
Intuit has said it expects the Credit Karma deal to be finalized by the second half of the year. It noted that the partnership isn’t intended to overpower the competition and that the businesses would run independently. Intuit also pointed out that taxes are just one of Credit Karma’s services.
An Intuit spokesperson told ProPublica that the company “is strongly committed to providing customers with free tax filing options and that will not change with this transaction. We intend for the Credit Karma tax product to remain available for those who want it.”
Intuit’s CEO Sasan Goodarzi told Bloomberg, “This is all about playing offense and delivering for customers.”
In Intuit’s latest annual financial report, it lists Credit Karma as a primary U.S. competitor.
In February, Intuit said it was close to closing the deal with Credit Karma. If the deal goes forward, Credit Karma’s CEO Kenneth Lin would remain in charge.