The lawsuit,
The FTC said this was deceptive, as the free option only applied to a minority of customers. While the commercials have a disclaimer saying the free option is only for simple returns, the FTC did not think the disclosure was adequate due to the small size of the words, the short amount of time they're on the screen, and the fact that voiceovers don't mention them. Further, it said that the definition of a "simple" return has narrowed over the years. The complaint added that TurboTax had been available for free to use on any form via the IRS's Free File Program, but
Intuit argued that the claims were not credible, and that it would fight the charges. Executive vice president and general counsel Kerry McLean said in a statement that the company's advertising campaigns have grown the number of people who file for free, and have been central to raising awareness of free tax prep options.
But Chief Administrative Law Judge D. Michael Chappell disagreed with the defense and concluded that Intuit's marketing was indeed deceptive, noting that only a minority of filers would ever be able to take advantage of the free filing option.
"The evidence proves that Respondent advertised to consumers that they could file their taxes online for free using TurboTax, when in truth, for approximately two-thirds of taxpayers, the advertised claim was false. Furthermore, a false representation that a product is free is a material fact influencing a consumer's choice with respect to a product. Accordingly, the evidence proves that Respondent engaged in deceptive advertising in violation of Section 5 of the FTC Act," said the judge's opinion.
The judge ordered — following suggestions from the FTC — that Intuit refrain from advertising that TurboTax is free in its advertising, marketing, promoting or offering for sale of any goods or services any material fact unless the good or service is indeed free for all consumers or, at the very least, lays out clearly and conspicuously who qualifies for free filing so as to leave no possibility for misunderstanding.
Intuit argued this was not necessary because it has stopped making such claims in its marketing materials. But the judge said that while the particulars may vary, the company was still making substantially similar claims. Further, the judge felt there was danger of recurring violations if his order was not made.
Intuit also argued that the additional disclosure won't help consumers and may even confuse them due to information overload. The judge, though, said this was only a hypothetical harm, and it can be avoided by not making claims that would necessitate such disclosures. Intuit also tried to argue that the order represents a First Amendment violation as the disclaimers would be compelled speech, and that the disclosures are unduly burdensome, given that their competitors won't need to make similar disclosures. The judge, though, said there is ample precedent for requiring such disclosures in commercial speech, and further did not feel that the requirements were especially onerous.
Intuit also said the order wasn't clear in how exactly it should be fulfilled. The judge, though, answered that it's not that complicated: The disclosures must be sufficiently clear to be understood by "those against whom they are directed" in order to "avoid raising serious questions as to their meaning and application" in the event of the need for future enforcement. The judge also noted there is ample guidance on how to enact orders like this one, based on previous cases, and suggested Intuit look to those.
Finally, Intuit argued it was improper to apply this order to the entire company when the case pertained specifically to TurboTax versus its other products. The judge, however, felt such a broad order was necessary in light of the many years the company said TurboTax was free, and further asserted that the deceptive advertising practices can be easily transferred to other areas like QuickBooks and Credit Karma.
Intuit, in a statement, noted that the FTC's ruling came from an FTC-employed judge in a case the FTC brought before itself and said this makes the decision a groundless ruling from a flawed system. It said the FTC often rules in its own favor in such cases. The company suggested the case is not over.
"Intuit will appeal this seemingly predetermined decision by the FTC to rule in its own favor and we are confident that when the matter ultimately returns to a neutral body Intuit will prevail, as it has previously in this matter. Intuit has always been clear, fair, and transparent with our customers and we remain committed to providing free tax preparation," said the statement.
