By Peter Rudegeair
The Justice Department cleared Credit Karma Inc.'s pending $7.1 billion sale to TurboTax maker Intuit Inc. after the two companies agreed to divest Credit Karma's burgeoning tax-preparation business to satisfy antitrust concerns.
Under a proposed settlement filed in federal court in Washington, D.C., Wednesday, Credit Karma and Intuit said they would sell Credit Karma Tax to Square Inc., the financial-technology company run by Twitter Inc. Chief Executive Jack Dorsey. The Wall Street Journal reported last month that Square was in talks to acquire the tax-prep business.
Square said it would pay $50 million in cash for Credit Karma Tax, which entered the market in 2017 and helped more than two million individuals file their 2020 taxes. Around 41 million people used Intuit's TurboTax to file their 2020 taxes.
The Justice Department argued that Credit Karma's small but growing tax-prep business, which charges no fees, provided a check on Intuit's ability to increase the prices it charges for paid versions of TurboTax and degrade the quality of free versions.
Allowing the two companies to move forward with the original deal would "further cement TurboTax's dominance," the department said in court papers.
Assistant Attorney General Makan Delrahim said in a news release that the sale of Credit Karma Tax to Square "ensures that taxpayers will continue to both benefit from this competition and benefit from new innovative financial service offerings from both Intuit and Square."
The Justice Department has spent recent months more closely scrutinizing deals in the financial and technology sectors. It filed a lawsuit earlier this month seeking to stop Visa Inc.'s $5.3 billion deal to acquire Plaid Inc., a key player in the financial-technology space.
Intuit CEO Sasan Goodarzi said in a news release that the settlement "brings us one step closer to transforming personal finance by making it simpler for consumers to find the right financial products, put more money in their pockets, and provide financial expertise and advice."
Write to Peter Rudegeair at Peter.Rudegeair@wsj.com
(END) Dow Jones Newswires