November 1, 2011 / 12:11 AM / 6 years ago

UPDATE 2-US judge rules against H&R Block bid to buy rival

* US judge grants permanent injunction, opinion sealed

* Could have implications for antitrust case against AT&T

By Jeremy Pelofsky

Oct 31 (Reuters) - A U.S. judge barred H&R Block Inc , the largest U.S. tax preparer, from acquiring TaxACT software maker 2SS Holdings Inc after the U.S. Justice Department argued the deal would be anti-competitive.

Judge Beryl Howell of the U.S. District Court for the District of Columbia issued a permanent injunction on Monday blocking the transaction from going forward, according to an order posted in the court docket.

Her opinion was sealed so the parties could redact any confidential business information. After that occurs, it will be publicly filed, possibly next month.

H&R Block agreed to acquire the company in October of 2010 in a deal worth $287.5 million in cash.

The Justice Department filed a lawsuit in May seeking to stop the deal, arguing that it would lead to higher prices and less innovation for people who wanted to do their own taxes.

"We are disappointed with the decision and continue to believe this was in the best interest of consumers," said Gene King, a spokesman for H&R Block. "We are taking time to analyze the verdict to determine our immediate next steps."

Justice Department spokeswoman Gina Talamona said it is "very pleased" with the court's decision. H&R Block could appeal Howell's ruling.

The digital tax market is led by Intuit Inc , which sells TurboTax software, with H&R Block in second place, while TaxACT is in third place, according to the Justice Department.

H&R Block, Intuit and TaxACT represent 90 percent of all sales of consumer tax software products, according to the Justice Department.

TaxACT was the first to offer basic tax preparation assistance online for free, and has since been followed by H&R Block and Jackson Hewitt. All three charge for more sophisticated services.

The Justice Department's antitrust division is also seeking to block AT&T's $39 billion acquisition of discount rival T-Mobile USA, a unit of Deutsche Telekom .

That deal would vault AT&T from the No. 2 spot into the leading position ahead of Verizon Wireless, a venture of Verizon Communications Inc and Vodafone Group Plc . Sprint is the No. 3 U.S. carrier.

One source familiar with the H&R Block case said that the judge agreed with much of the Justice Department's analysis on market concentration and competition. And since AT&T's case is similar in many respects, that likely does not bode well for the wireless carrier, the source said.

In both cases, Joseph Wayland leads the Justice Department's legal team.

An AT&T spokesman was not immediately available for comment. The trial in the AT&T case begins on Feb. 13.

The H&R Block case is United States of America v. H&R Block, Inc, U.S. District Court for the District of Columbia, No. 11-00948.

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