On September 8, the Federal Trade Commission’s (FTC) Chief Administrative Law Judge D. Michael Chappell issued an initial decision ruling that Intuit Inc. (Intuit) “engaged in deceptive advertising in violation of Section 5 of the FTC Act” by misleading consumers with its “free” service claims. In the decision, which is subject to appeal to the full commission, Judge Chappell found that Intuit deceptively marketed TurboTax, its online tax preparation filing software, “when it ran ads for ‘free’ tax products and services for which many consumers were ineligible.”
The decision highlights evidence that the majority of tax filers could not avail themselves of the company’s “free” service. This is due to its unavailability to those without a “simple tax return” such as a Form 1040. Individuals who received a 1099 form, for example independent contractors, gig workers, or small business owners, were not eligible to use the free edition of TurboTax. Consequently, in 2020, approximately two-thirds of tax filers were unable to use the free product. Despite the ineligibility, Intuit’s ads repeatedly claimed that consumers could file their taxes for free. One such example is a 30-second radio advertisement in which the word “free” is the only word sung, repeated approximately 32 times.
The order accompanying the ruling prohibits Inuit from engaging in the alleged deceptive practices. Specifically, it restricts Intuit from representing any good or service as free, unless:
- The good or service is genuinely free for all consumers; or
- Intuit clearly and conspicuously discloses all terms, conditions, and obligations that might limit the offer and potentially confuse consumers; and
- The fact is disclosed in a clear and conspicuous manner if the good or service is not free “to a majority of U.S. taxpayers.”.
Why It Matters. This decision carries significant implications for businesses, emphasizing the critical need for transparency, honesty, and regulatory compliance in their marketing strategies to avoid similar legal repercussions. In particular, businesses must exercise heightened diligence when using the term “free” in marketing collateral, given the extensive federal and state regulations and the ongoing enforcement actions. The decision comes in the wake of a substantial $141 million multistate settlement that Intuit reached with all 50 states and the District of Columbia in May 2023. This highlights the increasing possibility of companies facing simultaneous investigations and litigation from both state and federal governments.
Troutman Pepper State Attorneys General Team
|Ashley Taylor – Co-leader and Firm Vice Chair
Ashley is a partner in the firm’s Regulatory Investigations, Strategy + Enforcement (RISE) Practice Group and co-leader of the State Attorneys General practice. He focuses primarily on federal and state government regulatory and enforcement matters involving state attorneys general, the Consumer Financial Protection Bureau (CFPB), and the Federal Trade Commission (FTC). Drawing upon his experience as a deputy attorney general, Ashley has developed an extensive consumer practice with regard to the consumer financial services industry.
|Clay Friedman – Co-leader
Clay is a partner in the firm’s Regulatory Investigations, Strategy + Enforcement (RISE) Practice Group and co-leader of the State Attorneys General practice. Informed by nearly a decade in a state attorneys general office, and more than 25 years in private practice, Clay spends much of his time representing clients in singular or multistate regulatory actions. Clay has repeatedly led teams before all 50 state attorneys general and also handles matters with the Federal Trade Commission, the Consumer Financial Protection Bureau, and other local, state and federal agencies.
Judy is a partner in the firm’s Regulatory Investigations, Strategy and Enforcement (RISE) practice, based in the Richmond office. She brings experience serving as chair and commissioner of the Virginia State Corporate Commission (VSCC) from 2006 through 2022, which includes regulating the utilities, insurance, banking, and securities industries. She also served as Virginia’s attorney general from 2005-2006.
Stephen represents clients interacting with, and being investigated by, state attorneys general and other enforcement bodies, including the CFPB and FTC, as well as clients involved with litigation, particularly in heavily regulated industries.
A former deputy attorney general of New York, Avi applies his experience in bet-the-company matters, representing clients in criminal and civil investigations and enforcement actions before state and federal regulators, prosecutors and enforcement agencies.
Michael handles high-profile state attorneys general, FTC, and CFPB investigations by advising clients through these complex government inquiries. He assists clients through the entire life cycle of investigations, from regulatory enforcement through formal litigation.
As a former government official at the state and federal level, Ketan leverages extensive experience in the public and private sectors to skillfully represent client interests.
Tim is an attorney in the firm’s Regulatory Investigations, Strategy + Enforcement (RISE) Practice Group, with a primary focus on financial services litigation.
Chris represents clients in regulatory, civil and criminal investigations and litigation. In his practice, Chris regularly employs his prior regulatory experience to benefit clients who are interacting with and being investigated by state attorneys general.
Natalia is an associate in the firm’s business litigation practice. She recently received her J.D from the University of California, Davis School of Law.
Namrata is an associate in the firm’s Regulatory Investigations, Strategy + Enforcement (RISE) Practice Group, based in the Washington, D.C. office. Her work includes advising clients in regulatory investigations and compliance matters, in addition to representing clients in civil litigation matters.
Michael is an associate in the firm’s Regulatory Investigations, Strategy, and Enforcement Practice Group. Based out of the firm’s Boston office, Mike has deep experience in litigation, investigations, and other regulatory matters involving state-level regulators and state attorneys general.
Susan is an associate in the firm’s Consumer Financial Services Practice Group, and focuses her practice on consumer financial services matters. She has defended several of the nation’s largest and most influential financial institutions in individual and class action litigation involving the Telephone Consumer Protection Act (TCPA), Fair Credit Reporting Act (FCRA), Fair Debt Collection Practices Act (FDCPA), and other consumer privacy statutes. Susan also represents banks, fintechs, and financial services companies in connection with regulatory examinations and investigations brought by the CFPB, state attorneys general, and the California Department of Financial Protection and Innovation.
John represents clients in a wide variety of general and complex litigation matters, shareholder disputes, products liability, and privacy claims.
Whitney is an attorney in the firm’s Regulatory Investigations, Strategy + Enforcement (RISE) Practice Group. She represents clients facing state and federal regulatory investigations and enforcement actions, as well as related civil litigation.
Trey is an associate in the firm’s Regulatory Investigations, Strategy + Enforcement practice. His experience includes serving as a summer associate at the firm in 2021.
An experienced litigator, Daniel advises and represents regional, national and international companies, financial institutions and insurers in all facets of business, complex commercial and insurance coverage litigation. He is committed to working with his clients to find creative solutions to meet their needs.
Stephanie is Troutman Pepper’s senior government relations manager in the state attorneys general department.