Justice Department Blocks Microsoft’s Acquisition of Intuit
In 1994, Bill Gates saw dominance of the personal financial
software market as a means of becoming a central player in the global financial
system. Critics argued that, by dominating the point of access (the individual
personal computer) to online banking, Microsoft believed that it may be
possible to receive a small share of the value of each of the billions of
future personal banking transactions once online banking became the norm. With
a similar goal in mind, Intuit was trying to have its widely used financial
software package, Quicken, incorporated into the financial standards of the
global banking system. In 1994, Intuit had acquired the National Payment Clearinghouse
Inc., an electronic bill payments system integrator, to help the company
develop a sophisticated payments system. By 1995, Intuit had sold more than 7
million copies of Quicken and had about 300,000 bank customers using Quicken to
pay bills electronically. In contrast, efforts by Microsoft to penetrate the
personal financial software market with its own product, Money, were lagging
badly. Intuit’s product, Quicken, had a commanding market share of 70% compared
to Microsoft’s 30%. In 1994 Microsoft made a $1.5 billion offer for Intuit.
Eventually, it would increase its offer to $2 billion. To appease its critics,
it offered to sell its Money product to Novell Corporation. Almost immediately,
the Justice Department challenged the merger, citing its concern about the
anticompetitive effects on the personal financial software market.
Specifically, the Justice Department argued that, if consummated, the proposed
transaction would add to the dominance of the number-one product (Quicken),
weaken the number two-product (Money), and substantially increase concentration
and reduce competition in the personal finance/checkbook software market.
Moreover, the DoJ argued that there would be few new entrants because
competition with the new Quicken would be even more difficult and expensive.
Microsoft and its supporters argued that government interference would cripple
Microsoft’s ability to innovate and limit its role in promoting standards that
advance the whole software industry. Only a Microsoft–Intuit merger could create
the critical mass needed to advance home banking. Despite these arguments, the
regulators would not relent on their position. On May 20, 1995, Microsoft
announced that it was discontinuing efforts to acquire Intuit to avoid an
expensive court battle with the Justice Department.
Case Study Discussion Questions
1. Explain how Microsoft’s acquisition of Intuit might limit
the entry of new competitors into the financial software market.
2. How might the proliferation of Internet usage in the
twenty-first century change your answer to question 1?
3. Do you believe that the FTC might approve of Microsoft
acquiring Intuit today? Why or why not?