FTC Orders TurboTax Maker to Cease Deceptive Advertising of ‘Free’ Tax-Filing Software
The Federal Trade Commission (FTC) has issued an order to Intuit, the maker of TurboTax, demanding an end to what it describes as years of deceptive advertising for their “free” tax-filing software. The order comes after a lengthy investigation by the FTC, prompted by a series of reports from nonprofit newsroom ProPublica, which exposed Intuit’s misleading advertising tactics.
Intuit’s deceptive ad campaign was found to be broad, enduring, and willful, leading the FTC to conclude that a cease-and-desist order was necessary. The 93-page opinion accompanying the order harshly criticized Intuit for its practices. The investigation revealed that millions of Americans were enticed into purchasing paid tax preparation products, despite being eligible to file for free through a government-sponsored program. This resulted in tax prep companies, led by Intuit, generating $1 billion in revenue from customers who should have qualified for free filing.
In response to the order, Intuit announced its intention to appeal in federal court. The company stated that there would be no significant impact on its business since there is no monetary penalty involved. Intuit also maintained that it has always been transparent and fair with its customers.
Sam Levine, the director of the FTC’s Bureau of Consumer Protection, emphasized that the order sends a clear message to all companies: “‘free’ means free — not ‘free for a few’ or ‘free for some.’” The FTC aims to take action against any business that misuses the concept of “free” in a dishonest manner, similar to what Intuit has done.
Intuit recently made changes to its advertising strategy, possibly in anticipation of the FTC’s order. Previously, their ads claimed that the product was “FREE Guaranteed,” and their TV campaign featured people repeatedly saying “free.” However, these ads were discontinued in 2022 when the FTC and all 50 state attorneys general began investigating Intuit’s advertising practices. Despite this, Intuit continued to promote free tax preparation.
In reality, TurboTax was not free for most customers. Various conditions disqualified individuals from the free offering, forcing them to pay over $100 to file their tax returns. Many customers only discovered this after entering a significant amount of their tax information and were reluctant to start the process over again.
TurboTax’s current ads now state that only about 37% of taxpayers will qualify for free filing. The FTC’s order requires Intuit to provide clear disclosures in their ads, informing consumers that most filers won’t qualify for free filing. When space permits, Intuit must also provide detailed information on who does qualify for free filing.
Additionally, the order prohibits TurboTax from misrepresenting any material fact and ensures that Intuit does not make false claims about its products to consumers. The FTC aims to prevent further deceptive practices by holding Intuit accountable.
Despite making changes to its advertising, Intuit does not agree with the FTC’s order. The company raised objections during the process, arguing that disclosing that their product is not free for the majority of taxpayers would violate their First Amendment right to free speech. They also claimed that providing details on who qualifies would overwhelm consumers with information.
The FTC dismissed these arguments, as well as Intuit’s complaint that it was unfair to prevent TurboTax from advertising “free” tax preparation while competitors continued to do so. The commission clarified that the actions of others engaging in unlawful practices do not justify Intuit’s own deceptive practices.
Unsuccessful in their efforts with the FTC, Intuit plans to take their arguments to a federal appeals court. A spokesperson for the company criticized the FTC as biased and expressed confidence that Intuit will prevail when the matter is reviewed by a neutral body.
Overall, the FTC’s order against Intuit serves as a significant step in combating deceptive advertising practices. It highlights the importance of transparency and honesty in advertising, particularly when it comes to claims of “free” products or services. Consumers can now expect clearer disclosures from TurboTax regarding their eligibility for free tax filing, ensuring they are not misled by deceptive advertising tactics.
