Competition and innovation in the personal finance


Case Scenario:

In 1995, antitrust authorities claimed that the personal finance/checkbook software market was concentrated. Intuit's software, Quicken, was the top seller in the market with a market share of 69 percent. Microsoft's software, Money, was second with 22 percent of the market. Together, the Intuit and Microsoft market share was 91 percent.

In1995, Microsoft agreed to acquire all Intuit stock from Intuit's shareholders and to exchange 1.336 shares of Microsoft for each share of Intuit stock. If the sale had closed, the acquisition would have cost $2 billion.

The Justice Department sought to block the Microsoft acquisition of Intuit, arguing that it would lessen competition and innovation in the personal finance/checkbook software market. They also cited a statement by Microsoft to Intuit in which Microsoft declared it would substantially increase its competitive efforts if Intuit did not agree to be acquired. Furthermore, the Justice Department argued that if Microsoft did acquire Intuit (and Quicken), this would eliminate the chance of any new competitors in the personal finance/checkbook software market in the future. Quicken in the hands of Intuit was a strong competitor, but Quicken in the hands of powerful Microsoft would be daunting.

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Macroeconomics: Competition and innovation in the personal finance
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