“Free” must mean free? FTC seeks to ban Intuit from advertising TurboTax as a ‘free’ service | Venable LLP

At the height of tax filing season, when millions of consumers are still considering their method of filing, the Federal Trade Commission has set its sights on Intuit, Inc., one of the largest tax filing services in line.

On March 28, 2022, the FTC filed an administrative complaint against Intuit, alleging that the company’s marketing of TurboTax as a free The tax filing service misleads consumers, as the free service only applies to some, while many end up being hit with fees at the time of filing.

In a press release, Samuel Levine, director of the FTC’s Consumer Protection Bureau, said the Intuit ad is a “bait and switch” tactic that a court should immediately stop to protect paying consumers. taxes. The FTC simultaneously filed a lawsuit for a temporary restraining order and a preliminary injunction against Intuit in federal court in the Northern District of California, seeking to immediately restrain it from advertising its tax filing product and service. , TurboTax, like free.

The FTC alleges that Intuit’s ad campaigns violated FTC law because they contained misleading claims that the filing service was free: “at least your taxes are free”, “free guaranteed”, and the use of the “dialogue” between the actors in which the word “free” is essentially the only word spoken.

But according to the FTC, TurboTax isn’t actually free. Instead, it’s allegedly free only for consumers who file “simple” tax returns – returns using certain tax forms – and Intuit does not adequately disclose it to non-simple tax filers (who must switch to a paid TurboTax service to fill their deposits) until after the registrant invests time and effort in entering personal and financial information.

On April 4, 2022, Intuit filed its opposition to the FTC’s motion for a temporary restraining order and preliminary injunction, arguing that its advertisements contain disclaimers that the free version is only available for some applicants. The FTC, however, argues that these disclaimers are insufficient to remedy the alleged misrepresentation because they:

  1. Are disproportionately small compared to the prominent text emphasizing that the service is free.
  2. Appear for only a few seconds compared to the duration of the ads, which were shown in 15, 30 and 60 second versions.
  3. Are written only, often in a font color similar to the background color, and are not read by a voiceover.

Intuit also argues that its high customer satisfaction scores and above-average retention indicate that its customers are not being deceived by Intuit’s “free” marketing campaign. The FTC counters that high customer satisfaction and retention are not indicative of a lack of deception, citing other possible reasons for such results, including reducing dissonance (i.e. say, “I paid to use TurboTax, so I must have enjoyed it”); high perceived switching costs; status quo bias (i.e., even for experiences that consumers associate with negative emotions, such as reporting income, they are likely to maintain the status quo); and the attribution of unforeseen costs to the tax situation of consumers rather than to Intuit’s business practices.

Additionally, although Intuit claims it informs consumers that they must upgrade to a paid product before consumers actually pay for the product, the FTC calls Intuit’s ad a “misleading door opener.” , arguing that “companies cannot induce first contact by deception”. , even if they later correct the deception.

Intuit’s enforcement action confirms that the FTC takes price claims very seriously. Companies wishing to advertise their products or services as free would do well to remember that “free” should actually mean free – for everyone. If not, the ad should clearly and prominently state what “free” means.

A hearing on the FTC’s injunction motion is scheduled for April 21, 2022.

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