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WASHINGTON — In a significant development, a Federal Trade Commission judge issued a preliminary ruling against Intuit, the maker of TurboTax, a popular tax filing software. The ruling states that Intuit deceived consumers with advertisements for supposedly “free” tax products.
The judge found that Intuit violated Section 5 of the FTC Act by promoting tax products and services as “free” when many customers did not qualify for them. Chief Administrative Law Judge D. Michael Chappell made this initial ruling, and the full commission will review it before issuing a final decision.
Intuit plans to appeal the ruling, according to Rick Heineman, a spokesperson for the company. Heineman criticized the FTC’s handling of the case, calling it a flawed system and a groundless ruling.
Sam Levine, the director of the FTC’s Bureau of Consumer Protection, defended the judge’s ruling, stating that it was unbiased. Levine explained that the Administrative Law Judge has complete independence from the rest of the agency and that the ruling was based on a meticulous and thorough examination of the evidence.
In addition to the ruling, Chappell issued a cease-and-desist order against Intuit to prevent any further misleading advertisements. This order requires Intuit to advertise goods and services as “free” only if they are available to all customers, a majority of U.S. taxpayers, or if there are clear limitations. The order will remain in effect for the next 20 years and must be shared with relevant parties, according to the FTC.
Following the announcement of the ruling, Intuit’s shares closed down 0.55%, after previously reaching a 52-week high.
In a 2022 administrative complaint, the FTC alleged that millions of taxpayers, including those who receive certain IRS forms or earn farm income, were not eligible for TurboTax’s “free” services. The complaint stated that approximately two-thirds of filers could not use the free service in 2020.
In 2022, Intuit reached an agreement with all 50 states and the District of Columbia to pay $141 million to users who had paid for TurboTax when it should have been free. This settlement affected approximately 4.4 million consumers.
Section 5 of the FTC Act prohibits companies from engaging in misleading practices that can harm consumers.
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