United States
| Published date | 29 April 2021 |
| Citation | 86 FR 22706 |
| Record Number | 2021-08971 |
| Section | Notices |
| Court | Antitrust Division |
Federal Register, Volume 86 Issue 81 (Thursday, April 29, 2021)
[Federal Register Volume 86, Number 81 (Thursday, April 29, 2021)]
[Notices]
[Pages 22706-22711]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-08971]
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DEPARTMENT OF JUSTICE
Antitrust Division
United States v. Intuit Inc., et al.; Response to Public Comments
Pursuant to the Antitrust Procedures and Penalties Act, 15 U.S.C.
16(b)-(h), the United States hereby publishes below the Response to
Public Comments on the Proposed Final Judgment in United States v.
Intuit Inc., et al., Civil Action No. 1:20-cv-03441-ABJ, which was
filed in the United States District Court for the District of Columbia
on April 23, 2021, together with a copy of the one comment received by
the United States.
A copy of the comment and the United States' response to the
comment is available at https://www.justice.gov/atr/case/us-v-intuit-inc-and-credit-karma-inc. A copy of the comment and the United States'
response are available for inspection at the Office of the Clerk of the
United States District Court for the District of Columbia. Copies of
these materials may also be obtained from the Antitrust Division upon
request and payment of the copying fee set by Department of Justice
regulations.
Suzanne Morris,
Chief, Premerger and Division Statistics, Antitrust Division.
United States District Court for the District of Columbia
United States of America, Plaintiff, v. Intuit Inc., and Credit
Karma, Inc., Defendants.
Civil Action No.: 1:20-cv-03441-ABJ
Response of Plaintiff United States to Public Comment on the Proposed
Final Judgment
Pursuant to the requirements of the Antitrust Procedures and
Penalties Act (the ``APPA'' or ``Tunney Act''), 15 U.S.C. 16, the
United States hereby responds to the one public comment received
regarding the proposed Final Judgment in this case. After careful
consideration of the submitted comment, the United States continues to
believe that the divestiture required by the proposed Final Judgment
provides an effective and appropriate remedy for the antitrust
violation alleged in the Complaint and is therefore in the public
interest. The United States will move the Court for entry of the
Amended Proposed Final Judgment after the public comment and this
response have been published as required by 15 U.S.C. 16(d).
I. Procedural History
On February 24, 2020, Intuit Inc. (``Intuit'') agreed to acquire
Credit Karma, Inc. (``Credit Karma'') (collectively, ``Defendants'')
for approximately $7.1 billion. After a thorough and comprehensive
investigation, the United States filed a civil antitrust Complaint
against Defendants on November 25, 2020, seeking to enjoin the proposed
transaction because it would likely substantially lessen competition
for the development, provision, operation, and support of digital do-
it-yourself (``DDIY'') tax preparation products that help individuals
file U.S. federal and state income tax returns (``DDIY tax preparation
products''), in violation of Section 7 of the Clayton Act, 15 U.S.C.
18. See Dkt. No. 1.
At the same time the Complaint was filed, the United States filed a
proposed Final Judgment and an Asset Preservation and Hold Separate
Stipulation and Order (``Stipulation and Order'') in which the United
States and Defendants consent to entry of the proposed Final Judgment
after compliance with the requirements of the APPA. See Dkt. Nos. 2-2,
2-1. On December 1, 2020, the Court entered the Stipulation and Order.
See Dkt. No. 3. On December 8, 2020, the divestiture contemplated by
the proposed Final Judgment was effectuated to Square, Inc.
(``Square''). Pursuant to requirements under the APPA, the United
States filed the Competitive Impact Statement on December 10, 2020,
describing the transaction and the proposed Final Judgment. See Dkt.
Nos. 3, 10. On December 16, 2020, the United States published the
Complaint, proposed Final Judgment, and Competitive Impact Statement in
the Federal Register, see 85 FR 81501 (Dec. 16, 2020), and caused
notice regarding the same, together with directions for the submission
of written comments relating to the proposed Final Judgment, to be
published in The Washington Post from December 15, 2020, through
December 21, 2020. The 60-day period for public comment ended on
February 19, 2020. The United States received one comment concerning
the allegations in the Complaint, attached as Exhibit 1. On March 9,
2021, the United States filed a Joint Notice of Amended Proposed Final
Judgment (the ``Joint Notice''), attaching an Amended Proposed Final
Judgment as Exhibit 1. See Dkt. Nos. 13, 13-1. As stated in the Joint
Notice, the Amended Proposed Final Judgement addresses a technical
clarification to the original proposed Final Judgment to allow Intuit
to comply with its obligations under its Memorandum of Understanding
with the Internal Revenue Service (IRS) in connection with Intuit's
participation in the IRS Free File program. See Dkt. No. 13 at pp. 1,
3. The Amended Proposed Final Judgment is identical in all respects to
the original proposed Final Judgment except for the change to Paragraph
IV(O)(2), which has been made for the limited purpose of permitting
Intuit to comply with obligations to the IRS. See Dkt. 13 at p. 4.
II. The Complaint and the Amended Proposed Final Judgment
The Complaint alleges that Intuit's proposed acquisition of Credit
Karma would likely eliminate existing head-to-head competition between
Intuit's DDIY tax preparation business, TurboTax, and Credit Karma's
DDIY tax preparation business, Credit Karma Tax (``CKT'').
Specifically, CKT has been an important competitive constraint on
Intuit's TurboTax, and such head-to-head competition has led to lower
prices and increased quality for DDIY tax preparation products. The
Complaint also alleges that, absent the merger, the competition between
TurboTax and
[[Page 22707]]
CKT would intensify as CKT continues to grow and erode Intuit's
substantial base of TurboTax customers. The proposed acquisition, if
left unremedied, would reduce existing and future competition,
resulting in higher prices, lower quality, and reduced choice for the
DDIY tax preparation products upon which millions of American consumers
rely, in violation of Section 7 of the Clayton Act, 15 U.S.C. 18.
The Amended Proposed Final Judgment is designed to remedy the
likely harm to competition alleged in the Complaint by requiring a
divestiture that will establish an independent, economically viable
competitor. Under the Amended Proposed Final Judgment, Defendants are
required to divest CKT, as well as other related tangible and
intangible assets, to an acquirer approved by the United States, in
such a way as to satisfy the United States, in its sole discretion,
that the divestiture assets can and will be operated by the acquirer as
a viable, ongoing business that can compete effectively in the market
for DDIY tax preparation products. Intuit proposed Square as the
acquirer. After a rigorous evaluation, the United States approved
Square as the acquirer. Square is a well-financed company with a
popular and expanding consumer finance platform called Cash App. Square
will offer the divestiture assets as a new DDIY tax preparation product
via Cash App.\1\
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\1\ See Square's Q4 2020 Shareholder Letter at 16, available at
https://s27.q4cdn.com/311240100/files/doc_financials/2020/q4/2020-Q4-Shareholder-Letter-Square.pdf (last visited March 25, 2021) (``In
the fourth quarter, we completed our acquisition of Credit Karma Tax
for $50 million, which we intend to incorporate into the Cash App
ecosystem as a tax filing product for individuals.'').
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The Amended Proposed Final Judgment also allows the acquirer, at
its option, to enter into a transition services agreement with
Defendants for a period of up to 24 months. As explained in the
Competitive Impact Statement, this option gives the acquirer sufficient
time to integrate the divestiture assets into its existing business and
to ensure customers can smoothly transition from CKT to the acquirer.
See Dkt. No. 10 at 9.
III. Standard of Judicial Review
The Clayton Act, as amended by the APPA, requires that proposed
consent judgments in antitrust cases brought by the United States be
subject to a 60-day comment period, after which the Court shall
determine whether entry of the proposed Final Judgment ``is in the
public interest.'' 15 U.S.C. 16(e)(1). In making that determination,
the Court, in accordance with the statute as amended in 2004, is
required to consider:
(A) The competitive impact of such judgment, including termination
of alleged violations, provisions for enforcement and modification,
duration of relief sought, anticipated effects of alternative remedies
actually considered, whether its terms are ambiguous, and any other
competitive considerations bearing upon the adequacy of such judgment
that the court deems necessary to a determination of whether the
consent judgment is in the public interest; and
(B) the impact of entry of such judgment upon competition in the
relevant market or markets, upon the public generally and individuals
alleging specific injury from the violations set forth in the complaint
including consideration of the public benefit, if any, to be derived
from a determination of the issues at trial.
15 U.S.C. 16(e)(1)(A) & (B). In considering these statutory factors,
the Court's inquiry is necessarily a limited one as the government is
entitled to ``broad discretion to settle with the defendant within the
reaches of the public interest.'' United States v. Microsoft Corp., 56
F.3d 1448, 1461 (DC Cir. 1995); United States v. U.S. Airways Grp.,
Inc., 38 F. Supp. 3d 69, 75 (D.D.C. 2014) (explaining that the
``court's inquiry is limited'' in APPA settlements); United States v.
InBev N.V./S.A., No. 08-1965 (JR), 2009 U.S. Dist. LEXIS 84787, at *3
(D.D.C. Aug. 11, 2009) (noting that a court's review of a consent
judgment is limited and only inquires ``into whether the government's
determination that the proposed remedies will cure the antitrust
violations alleged in the complaint was reasonable, and whether the
mechanisms to enforce the final judgment are clear and manageable'').
Under the APPA, a court considers, among other things, the
relationship between the remedy secured and the specific allegations in
the government's complaint, whether the proposed Final Judgment is
sufficiently clear, whether its enforcement mechanisms are sufficient,
and whether it may positively harm third parties. See Microsoft, 56
F.3d at 1458-62. With respect to the adequacy of the relief secured by
the proposed Final Judgment, a court may not ```make de novo
determination of facts and issues.''' United States v. W. Elec. Co.,
993 F.2d 1572, 1577 (DC Cir. 1993); see also Microsoft, 56 F.3d at
1460-62; United States v. Alcoa, Inc., 152 F. Supp. 2d 37, 40 (D.D.C.
2001); United States v. Enova Corp., 107 F. Supp. 2d 10, 16 (D.D.C.
2000); InBev, 2009 U.S. Dist. LEXIS 84787, at *3. Instead, ``[t]he
balancing of competing social and political interests affected by a
proposed antitrust consent decree must be left, in the first instance,
to the discretion of the Attorney General.'' W. Elec. Co., 993 F.2d at
1577 (quotation marks omitted).
``The court should bear in mind the flexibility of the public
interest inquiry: The court's function is not to determine whether the
resulting array of rights and liabilities is one that will best serve
society, but only to confirm that the resulting settlement is within
the reaches of the public interest.'' Microsoft, 56 F.3d at 1460
(quotation marks omitted); see also United States v. Deutsche Telekom
AG, No. 19-2232 (TJK), 2020 WL 1873555, at *7 (D.D.C. Apr. 14, 2020).
More demanding requirements would ``have enormous practical
consequences for the government's ability to negotiate future
settlements,'' contrary to congressional intent. Id. at 1456. ``The
Tunney Act was not intended to create a disincentive to the use of the
consent decree.'' Id.
The United States' predictions about the efficacy of the remedy are
to be afforded deference by the Court. See, e.g., Microsoft, 56 F.3d at
1461 (recognizing courts should give ``due respect to the Justice
Department's . . . view of the nature of its case''); United States v.
Iron Mountain, Inc., 217 F. Supp. 3d 146, 152-53 (D.D.C. 2016) (``In
evaluating objections to settlement agreements under the Tunney Act, a
court must be mindful that [t]he government need not prove that the
settlements will perfectly remedy the alleged antitrust harms[;] it
need only provide a factual basis for concluding that the settlements
are reasonably adequate remedies for the alleged harms.'') (internal
citations omitted); United States v. Republic Servs., Inc., 723 F.
Supp. 2d 157, 160 (D.D.C. 2010) (noting ``the deferential review to
which the government's proposed remedy is accorded''); United States v.
Archer-Daniels-Midland Co., 272 F. Supp. 2d 1, 6 (D.D.C. 2003) (``A
district court must accord due respect to the government's prediction
as to the effect of proposed remedies, its perception of the market
structure, and its view of the nature of the case''). The ultimate
question is whether ``the remedies [obtained by the Final Judgment are]
so inconsonant with the allegations charged as to fall outside of the
`reaches of the public interest.' '' Microsoft, 56 F.3d at 1461
(quoting W. Elec. Co., 900 F.2d at 309).
Moreover, the Court's role under the APPA is limited to reviewing
the remedy in relationship to the violations that the United States has
alleged in its
[[Page 22708]]
complaint, and does not authorize the Court to ``construct [its] own
hypothetical case and then evaluate the decree against that case.''
Microsoft, 56 F.3d at 1459; see also U.S. Airways, 38 F. Supp. 3d at 75
(noting that the court must simply determine whether there is a factual
foundation for the government's decisions such that its conclusions
regarding the proposed settlements are reasonable); InBev, 2009 U.S.
Dist. LEXIS 84787, at *20 (``[T]he `public interest' is not to be
measured by comparing the violations alleged in the complaint against
those the court believes could have, or even should have, been
alleged''). Because the ``court's authority to review the decree
depends entirely on the government's exercising its prosecutorial
discretion by bringing a case in the first place,'' it follows that
``the court is only authorized to review the decree itself,'' and not
to ``effectively redraft the complaint'' to inquire into other matters
that the United States did not pursue. Microsoft, 56 F.3d at 1459-60.
In its 2004 amendments to the APPA, Congress made clear its intent
to preserve the practical benefits of using consent judgments proposed
by the United States in antitrust enforcement, Public Law 108-237 Sec.
221, and added the unambiguous instruction that ``[n]othing in this
section shall be construed to require the court to conduct an
evidentiary hearing or to require the court to permit anyone to
intervene.'' 15 U.S.C. 16(e)(2); see also U.S. Airways, 38 F. Supp. 3d
at 76 (indicating that a court is not required to hold an evidentiary
hearing or to permit intervenors as part of its review under the APPA).
This language explicitly wrote into the statute what Congress intended
when it first enacted the APPA in 1974. As Senator Tunney explained:
``[t]he court is nowhere compelled to go to trial or to engage in
extended proceedings which might have the effect of vitiating the
benefits of prompt and less costly settlement through the consent
decree process.'' 119 Cong. Rec. 24,598 (1973) (statement of Sen.
Tunney). ``A court can make its public interest determination based on
the competitive impact statement and response to public comments
alone.'' U.S. Airways, 38 F. Supp. 3d at 76 (citing Enova Corp., 107 F.
Supp. 2d at 17).
IV. Summary of Comment and the United States' Response
The United States received one public comment in response to the
proposed Final Judgment. The comment is from Travis Curtis, a Credit
Karma Tax user and former TurboTax user and employee. Mr. Curtis's
overarching concern is that Square will not effectively compete with
nor constrain Intuit. More specifically, the concerns raised in the
comment can be grouped into three categories: (1) Concerns with Square
as the acquirer; (2) adequacy of the provisions within the proposed
Final Judgment; and (3) dissatisfaction with Intuit's company history.
Upon review, the United States believes that nothing in the comment
warrants a change to the proposed Final Judgment or supports a
conclusion that the Amended Proposed Final Judgment is not in the
public interest. As required by the APPA, the comment, with the
author's contact information removed, and this response will be
published in the Federal Register.
a. Square Has the Means and Incentive To Compete Effectively
Mr. Curtis expresses concern with Square as the approved acquirer
and contends that Square does not meet the criteria for a divestiture
buyer outlined in the proposed Final Judgment. In support of that
contention, Mr. Curtis states that Square's available customer base is
smaller than Credit Karma's customer base; Square's user demographics
are less-aligned with the tax-paying population than are Credit Karma's
user demographics; and the divestiture assets do not have ``any clear
or immediate benefits'' to Square's business model. Exhibit 1 at 1-2.
Square meets the criteria outlined in the Amended Proposed Final
Judgment. Paragraph IV.D. of the Amended Proposed Final Judgment
requires divestiture to an acquirer that ``has the intent and
capability (including the necessary managerial, operational, technical,
and financial capability) to compete effectively in the development,
provision, operation, and support of digital do-it-yourself personal
United States federal or state income tax return preparation and e-
filing products and services.'' The United States rigorously evaluated
Square, including its qualifications, experience, incentives, business
plans, finances, and commercial relationships. Based on that
evaluation, the United States concluded that Square is capable,
willing, and incentivized to compete effectively and will preserve
competition in the market for DDIY tax preparation products.
Although Square operates a multi-billion-dollar business with a
variety of financial solutions for businesses and consumers, Mr. Curtis
questions Square's ability to compete in the market for DDIY tax
preparation products. Specifically, he suggests that Square is an
unacceptable purchaser because its consumer-facing platform, Cash App,
has a smaller and different user base than Credit Karma's broad
consumer-facing platform. As a result, Mr. Curtis contends, Square will
have less opportunity than Credit Karma to advertise the CKT DDIY tax
product to existing users.
There is no basis for this concern. Although Square may have a
smaller user base for its personal finance products than Credit Karma,
Square has the ability to market the divestiture assets to tens of
millions of existing users. Moreover, Square has grown its Cash App
user base tenfold over the past four years, demonstrating its marketing
and customer-acquisition capabilities.\2\ Square's existing consumer-
facing products--and experience in those markets--will enhance, rather
than hinder, Square's ability to compete in the market for DDIY tax
preparation products.
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\2\ See Square's Q4 2020 Shareholder Letter at 4, available at
https://s27.q4cdn.com/311240100/files/doc_financials/2020/q4/2020-Q4-Shareholder-Letter-Square.pdf (last visited March 25, 2021).
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Mr. Curtis also questions Square's commitment to competing in the
market for DDIY tax preparation products. Specifically, he suggests
that Square is an unacceptable acquirer because ``CKT does not have any
clear or immediate benefits to the Square model.'' Exhibit 1 at 1-2.
The United States assessed Square's business plans and incentives to
compete and found that Square has the incentive to maintain the level
of premerger competition in the market for DDIY tax preparation
products.
The United States determined that the addition of DDIY tax
preparation capabilities is consistent with Square's stated strategy
and past business practices. The United States' assessment was
confirmed by Square in a recent filing with the Securities and Exchange
Commission, in which Square stated that it ``see[s] the launch and
advertising of new Cash App features as an important way to attract new
customers'' and offers certain features for free to encourage use of
the platform.\3\
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\3\ See Square's 2020 10-K at 12, available at https://s27.q4cdn.com/311240100/files/doc_financials/2020/q4/Square-10K-2020.pdf (last visited March 25, 2021).
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Mr. Curtis also suggests selling the divestiture assets to the IRS
instead of Square to remedy perceived failings of the Free File
Alliance program. However, any alleged failings of the Free File
Alliance program are outside the scope of the United States' merger
review, the violations alleged in the Complaint, and the present APPA
proceedings. See U.S. Airways, 38 F.
[[Page 22709]]
Supp. 3d at 76 (`` `Moreover, the Court's role under the APPA is
limited to reviewing the remedy in relationship to the violations that
the United States has alleged in its Complaint. . . .' '') (quoting
United States v. Graftech Int'l, No. 10-cv-2039, 2011 WL 1566781, at
*13 (D.D.C. Mar. 24, 2011)).
b. The Divestiture Gives Square Everything Necessary To Preserve
Competition
Mr. Curtis contends that, regardless of the identity of the
approved acquirer, the provisions of the proposed Final Judgment are
inadequate. He then lists a variety of additional provisions that
ostensibly should have been included in the proposed Final Judgment.
Exhibit 1 at 2. This is incorrect, however. The divestiture gives
Square everything necessary to preserve competition.
First, Mr. Curtis notes that there are ``[n]o requirements for
transitioning the log-in and account environment required to separate
CKT accounts from CK accounts with minimal burden to the consumer.''
Exhibit 1 at 2. However, the Amended Proposed Final Judgment allows
customers to seamlessly access their CKT accounts after Square's
purchase of the divestiture assets. Under Paragraph II.F.8. of the
Amended Proposed Final Judgment, Square is receiving ``all records and
data,'' including customer accounts, as part of the divestiture. For
the Year 1 Period defined in the Amended Proposed Final Judgment, and
pursuant to Paragraphs IV.M.2., IV.M.4., and IV.M.5. of the Amended
Proposed Final Judgment, CKT users will continue to have access to
their accounts through the same links that they have always used.
Paragraph IV.L. provides Square with the option to receive transition
services related to, among other things, data migration and technology
infrastructure, to ensure that Square can make users' account data
available once the divestiture assets are integrated with Square's
platform.
Second, Mr. Curtis complains that ``[m]any of the commitments of
the Defendant, such as how long they must keep the CKT link on CK, are
for only 2 years.'' Exhibit 1 at 2. The restrictions on the Defendants'
behavior that Mr. Curtis seeks to extend are time-limited for an
important reason. They are designed to allow a smooth transition of the
divestiture assets to the acquirer without creating ongoing
entanglements, which could dampen competition between Defendants and
acquirer. A longer time period would unnecessarily compromise Square's
independence.
Third, Mr. Curtis advocates for prohibiting the transfer of
customer consents under Section 7216 of the Internal Revenue Code and
Treasury Regulations thereunder. Exhibit 1 at 2. In fact, the Amended
Proposed Final Judgment does not impose any transfer requirement.
Instead, Defendants are required to support the acquirer's efforts in
obtaining such consents from customers during the Year 1 Period, as
defined in the proposed Final Judgment. See Dkt. No. 2-2 at ] IV.M.3 &
Dkt. No. 13-1 at ] IV.M.3. This arrangement gives Square the
opportunity to more fully integrate data from the CKT business into the
other features of its Cash App platform if the customer consents,
putting Square in the same position as CKT.
Finally, Mr. Curtis also implies that additional measures
proscribing Defendants' and acquirer's activities going forward should
be included in the proposed Final Judgment, such as limiting
Defendants' use of ``paid search terms or other forms of advertising
and marketing''; requiring long-term investment commitments from the
acquirer; and limiting partnerships between Defendants and the acquirer
in ``industries outside of DDIY tax prep.'' Exhibit 1 at 2.
These additional proscriptions are unnecessary. First, the Amended
Proposed Final Judgment is not intended to weaken or limit Intuit; it
is intended to position Square to compete as effectively as CKT.
Therefore, it is not necessary to restrict Intuit's marketing
activities following its acquisition of Credit Karma. Second, the
United States typically does not attempt to limit an acquirer's ability
to resell the divestiture assets, because ``[c]onditions change over
time'' and ``[t]he market for corporate control is imperfect.'' \4\
Instead, the United States insists that ``the purchaser have both the
intention and ability to compete in the market for the foreseeable
future.'' \5\ Similarly, because conditions change over time, the
United States is not well-positioned to make business decisions, such
as investment levels, for the acquirer after it assumes control of the
divestiture assets. Finally, it is not necessary to limit partnerships
between Defendants and Square in industries that are not implicated by
the proposed transaction because Square has every incentive to use the
divestiture assets to compete and succeed in the market for DDIY tax
preparation products.
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\4\ See U.S. Department of Justice, Antitrust Division Merger
Remedies Manual, at 30-31 (Sept. 2020), (https://www.justice.gov/atr/page/file/1312416/download).
\5\ See id. at 30.
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The proposed Final Judgment is the result of a thorough
investigation, during which the United States scrutinized Defendants'
and the acquirer's businesses and operations to identify a full
complement of assets, personnel, and rights needed to preserve
competition in the market for DDIY tax preparation products. The
divestiture gives Square everything necessary to preserve competition.
c. Comments Regarding Intuit's History Are Beyond the Scope of This
Action
Mr. Curtis also notes dissatisfaction with aspects of Intuit's
company history. These concerns go beyond the allegations in the United
States' Complaint and are thus beyond the scope of APPA review. See
U.S. Airways, 38 F. Supp. 3d at 76 (`` `Moreover, the Court's role
under the APPA is limited to reviewing the remedy in relationship to
the violations that the United States has alleged in its Complaint. . .
.' '') (quoting Graftech, 2011 WL 1566781, at *13).
V. Conclusion
After careful consideration of the public comment, the United
States continues to believe that the Amended Proposed Final Judgment
provides an effective and appropriate remedy for the antitrust
violation alleged in the Complaint and is therefore in the public
interest. The United States will move this Court to enter the Final
Judgment after the comment and this response are published as required
by 15 U.S.C. 16(d).
Dated: April 23, 2021.
Respectfully submitted,
FOR PLAINTIFF UNITED STATES OF AMERICA
/s/--------------------------------------------------------------------
Brian Hanna,
Attorney for the United States. U.S. Department of Justice,
Antitrust Division, 450 Fifth Street NW, Suite 8000, Washington, DC
20530, Tel: (202) 598-8360, Email: [email protected].
EXHIBIT 1
From: [Redacted]
To: ATR-Antitrust--Internet (ATR)
Subject: Public Comment on U.S. V. INTUIT INC. AND CREDIT KARMA,
INC.
Date: Friday, February 5, 2021 5:36:41 p.m.
To Whom It May Concern,
My name is Travis Curtis and I write to add public comment to the
case United States v. Intuit Inc. and Credit Karma, Inc. according to
the Tunney Act. I write today as a taxpayer, DDIY tax prep software
user, Credit Karma
[[Page 22710]]
Tax user, former TurboTax user and employee. I worked for four tax
seasons at Intuit TurboTax as a Business Data Analyst. I have also
worked at other financial services and tech companies as a data analyst
in valuation, operations, marketing, and product. I say this to provide
background and for transparency sake as my concerns are honest and
sincere and I would like them to be treated as such.
The Proposed Final Judgement states, ``D. The divestiture must be
made to an Acquirer that, in the United States' sole judgment, has the
intent and capability (including the necessary managerial, operational,
technical, and financial capability) to compete effectively in the
development, provision, operation, and support of digital do-it-
yourself personal United States federal or state income tax return
preparation and e-filing products and services.'' I believe that Square
does not meet these requirements for an eligible Acquirer and that the
Proposed Final Judgement comes short in its requirements and does not
adequately provide protection to the consumer for the following
reasons:
1. Credit Karma Tax would be moving from a business with 100
million customers to Square's CashApp which is roughly 30 million, more
than a two thirds reduction in the available customer base to advertise
within the platform.
2. Square user demographic aligns with the tax paying population
much less than Credit Karma, which would result in a further reduction
of customer base. Poor match of user demographic. CK provides credit
scores so one can safely assume a large % of the user base overlaps
with the tax paying base. Square provides B2B products to small
businesses and provides money transfer services to consumers with
CashApp, its largest offering by number of users. This service is
marketed to a younger and lower income demographic, including students,
often as a substitute to a bank account. Both of these factors lead me
to assume the % of the Square user base that can and would use CKT is
much smaller
3. Loss of supportive business model. CKT data directly benefits
and feeds into the CK business model and revenue generation. CKT does
not have any clear or immediate benefits to the Square model. The lead
of Square's Cash App, Brian Grassadonia, has stated, ``We're thrilled
to bring this easy-to-use tax product to customers as we continue to
build out the suite of tools Cash App offers. With this acquisition, we
believe Cash App will be able to ease customers' burden of preparing
taxes every year.''; however, that is the most firm commitment or
reasoning announced by Square.
I would like to do a more formal analysis of these two businesses;
however, there is little publicly available information and the
Competitive Impact Statement provides no details, no metrics, and no
analysis of the businesses to support the conclusion that Square meets
the requirements of an Acquirer. There is nothing about how much of the
CKT customer base came from the CK customer base, retention rates, new
customer attraction rates, analysis of marketing channels, the entire
document is devoid of any analysis of impact. I am not a lawyer nor do
I have any experience with these documents; however, I expected some
sort of justification for the decision.
Regardless of the chosen acquirer, I believe that the Proposed
Final Judgement's requirements, limitations, and enforcement of the
parties fall short in the following ways:
1. No requirements for transitioning the log-in and account
environment required to separate CKT accounts from CK accounts with
minimal burden to the consumer.
2. Many of the commitments of the Defendant, such as how long they
must keep the CKT link on CK, are for only 2 years.
3. Signed 7216 waivers/consents should not transfer over at all.
4. No limitations on the Defendant on paid search terms or other
forms of advertising and marketing. As of today, Jan 14th 2021, Intuit
has paid to get the top result for the term ``credit karma tax''.
5. No requirements or commitments from the Acquirer to invest or
continue business long term.
6. No limitations on other partnerships between Intuit and the
Acquirer industries outside of DDIY tax prep.
These inadequacies in the Proposed Final Judgement at worst allow
for blatant corruption as nothing prevents Intuit and Square from
having colluded together on this to get rid of CKT and at best do
little to ensure the continued success of CKT. While I make no
assertion about motives, I cannot help be concerned by the lack of
protection provided to CKT, taxpayers, and consumers. Technology
companies have been given a large amount of leeway when it comes to
regulation out of fear of stifling innovation; however, this has
created a completely opaque environment where those same technology
companies are taking advantage of the situation.
The following hypothetical scenario would be completely possible
under the Proposed Final Judgement: Intuit acquires Credit Karma and
sells Credit Karma Tax to Square. Intuit then adds a button to the
Credit Karma website directing customers to the TurboTax site to get
their taxes done by a tax professional. Since the Proposed Final
Judgement only places limitations of DDIY tax preparation software and
the current link from CK to CKT, there is nothing to prevent them from
adding a new button that links to non-DDIY tax preparation solutions,
such as the new TurboTax Live Full Service product which Intuit has
launched for the fiscal year 2020 tax season. That change could take
place any moment. Credit Karma Tax has also benefited from being able
to market to the Credit Karma user base; however, under the rules,
Credit Karma Tax will only have access to advertise to the CKT customer
base, from 100 million customers to ~2 million, a 98% reduction. After
2 years, even the existing button from Credit Karma to CKT can be
changed to go to TurboTax. Worst of all is the possibility that the
sale to Square could be paid off elsewhere. Both Intuit and Square are
primarily B2B companies, not B2C; Intuit maintains Quickbooks and
Square maintains their B2B POS hardware business. Even if Square didn't
want CKT at all, Intuit could easily make up the sale price of CKT to
Square by offering a deal or partnership between other, and franky
larger, business units as the proposed rules only limit further
partnerships between Square and Intuit in the DDIY tax prep space.
Since Intuit is now entering the prepared taxes industry with TurboTax
Live Full Service, they could even create a partnership in that space
without violating the terms laid out. In the end, Intuit would be able
to acquire Credit Karma, get rid of a major competitor in CKT, and even
get paid $50 million dollars along the way.
While I want to believe in the good intentions of all involved, I
cannot overlook the context of the moment and the history of the actors
involved. In 2010, Inuit was sued by the DOJ for employee antitrust
violations, in 2019 and 2020 there was much reporting about Intuit's
efforts to hide their IRS Free File product from the consumer, and
currently Intuit is trying to settle a class action for the same issues
with a value that would leave compensation at ~$2.10 per impacted
customer. Intuit has also failed to innovate within the Free File
Alliance product, a provision of the MOU, for years.
If there truly is concern about ensuring consumers continue to have
a
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free DDIY tax prep solution, there should be consideration to sell
Credit Karma Tax to the IRS so that the IRS may directly provide this
service to the American people for free. The $50 million sale would
account for
