In an initial decision announced today, the Federal Trade Commission’s Chief Administrative Law Judge (ALJ), D. Michael Chappell, ruled that Intuit Inc. (Intuit), the maker of the popular TurboTax tax filing software, “engaged in deceptive advertising in violation of Section 5 of the FTC Act” and deceived consumers when it ran ads for “free” tax products and services for which many consumers were ineligible.
In ruling in favor of complaint counsel—FTC staff in the Bureau of Consumer Protection—the ALJ also found that there is a “cognizant danger of a recurring violation” by Intuit, and issued an order requiring the company to cease-and-desist from engaging in the deceptive practices alleged in the complaint.
Under the terms of the ALJ’s order, which can be appealed to the full Commission, Intuit is “prohibited from engaging in deceptive practices in the future.” It also is barred from representing that any good or service is free, unless: 1) it is free for all consumers; 2) it clearly and conspicuously discloses any terms that would limit the offer and might be misunderstood by consumers; and 3) if the good or service is not free “to a majority of U.S. taxpayers,” this also must be disclosed in a clear and conspicuous manner.
The order also prohibits specific misrepresentations by Intuit regarding the tax preparation and filing services it offers, requires that the order be distributed to relevant parties for the next 20 years, and include strict recordkeeping and reporting provisions to ensure the company’s compliance.
The Staff’s 2022 Complaint
In March 2022, the FTC announced staff was taking action against Intuit by issuing an administrative complaint against the company for deceiving consumers with allegedly deceptive advertisements pitching “free” tax filing that millions of consumers could not use. In addition, to prevent ongoing harm to consumers rushing to file their taxes, Commission staff also filed a federal district court complaint asking a court to order Intuit to halt its deceptive advertising immediately. The district court case was later dismissed, and the case was tried administratively.
In the complaint, FTC staff alleged that the company’s ubiquitous advertisements touting their supposedly “free” products—some of which have consisted almost entirely of the word “free” spoken repeatedly—misled consumers into believing that they can file their taxes for free with TurboTax. In fact, most tax filers can’t use the company’s “free” service because it is not available to millions of taxpayers, such as those who get a 1099 form for work in the gig economy, or those who earn farm income. In 2020, for example, approximately two-thirds of tax filers could not use TurboTax’s free product.
The Appeals Process. The ALJ’s initial decision is subject to automatic review by the full Federal Trade Commission. Any party may file an appeal brief containing its objections to the Initial Decision. The Commission will conduct a de novo review of the entire record and may schedule oral argument before issuing a final decision.
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