FTC: Administrative Case Against Intuit over Deceptive TurboTax Marketing Practices Must Go to Trial

On Tuesday, the Federal Trade Commission (FTC) announced that commissioners voted to deny a motion by the agency’s Bureau of Consumer Protection (BCP) seeking an abbreviated or summary decision against Intuit Inc. for engaging in deceptive advertising of its TurboTax tax preparation service.

The opinion and order said a decision on the merits of the case would be better made after fuller factual development at trial before an Administrative Law Judge (ALJ).

As previously reported, the FTC took issue with Intuit ads repeatedly claiming that consumers could file their taxes for free using TurboTax even though the service is free for only some consumers, based on what tax forms they need.

The agency’s March 2022 federal court complaint pointed to advertisements, including a television commercial in which almost every word spoken was the word “free.” In truth, many users put time and effort into gathering and inputting their financial records in order to prepare tax returns only to discover that they need to upgrade to a paid service to complete their taxes, the FTC said.

The agency alleged that the company’s deceptive “freemium” model misled consumers, including many low and middle-income Americans. It sought a restraining order and preliminary injunction to halt the acts it perceived as problematic.

The federal court denied the FTC’s motion for a temporary restraining order and a preliminary injunction in May 2022, finding that any prospective harm was attenuated because 2022 tax day had passed and with it, the bulk of Intuit’s advertising. Secondarily, the court said that Intuit removed problematic advertisements, and lastly, that the FTC’s parallel administrative action would likely be heard by an ALJ with subject matter expertise before Intuit resumes its advertising campaign in the lead-up to tax day 2023.

Now, the FTC has said that contrary to the CBP’s recommendation, sound policy supports a denial of summary decision. The opinion found that instead, trial would “provide a fuller factual record and facilitate a more complete and cohesive opinion that addresses all of the relevant legal and factual issues, and advertising claims at once.”

Factual disputes regarding many of the search ads rendered summary decision unwarranted based on the FTC’s obligation to resolve all fact-based ambiguities and draw all justifiable inferences in favor of the non-moving party, the decision explained.

The FTC voted 4-0 to issue the opinion. The case will now proceed before FTC ALJ D. Michael Chappell.