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On Monday, the Federal Trade Commission told TurboTax Maker Intuit that it is not allowed to advertise its products as "free" unless they actually are free to all customers--or unless it discloses within the ad what percentage of customers will get it for free. That order is the latest development in a battle over TurboTax ads that's been going on for more than four years. Intuit now says it will appeal the FTC's decision in federal court.
It's almost as if the company is out to get as much bad publicity and as pile up as many legal bills as it possibly can. If you're an entrepreneur or business leader, it's basically a case study in how to undermine your own brand. Intuit is a huge company with very deep pockets, and TurboTax is very much the market leader. So perhaps the company can afford to take this risk to defend its right to say what it wants in its ads. A similar move could be disastrous for a smaller or less wealthy business.
The FTC decision says Intuit "engaged in deceptive practices." For example, former TurboTax ads said things like "FREE Guaranteed. $0 Fed. $0 State. $0 to File," and 30-second video ads simply showed people saying the word "free" over and over, followed by a voiceover saying "That's right: TurboTax free edition is free."
But most filers can't use the free edition because it comes with a long list of restrictions. For example, you can't file for free with the service if you're reporting student loan interest, mortgage deductions, investment income, or charitable donations over a few hundred dollars, among many disqualifiers. All in all, the FTC says, only about a third of US taxpayers would be eligible to use TurboTax for free. And, because people often discover that they'll have to pay only after they've entered quite a lot of detailed information, many simply pay up rather than starting over from scratch.
Intuit argues in its filings that some 10 million taxpayers use TurboTax's free edition every year, and that most consumers know perfectly well that "free" does not necessarily mean free for everyone. It says its ads are specific to the free edition of TurboTax and that "no one can pay for those products, even if anyone wanted to." And, it argues, including the phrase "simple tax returns only" lets people know that "free" might not apply to them.
This is not the first time Intuit's found itself in legal trouble over consumers paying for its products. Intuit, along with other large tax prep companies, reached an agreement with the Internal Revenue Service in which it provided free tax prep services to those making less than $66,000 a year. But its website steered many such customers into its paid service anyway. The company is now refunding $141 million to those customers under a settlement reached with the attorneys general of all 50 states. (It has not admitted any wrongdoing, however.)
This week's ruling follows an earlier, initial ruling by one of the FTC's administrative law judges, a decision that was then reviewed and upheld by the full commission. Because of this, Intuit is questioning the validity of the FTC's actions altogether. "Commissioners for the U.S. Federal Trade Commission (FTC) unsurprisingly announced that they have ruled in favor of themselves in a lawsuit filed against Intuit," the company said in a statement. "We believe that when the matter ultimately returns to a neutral body we will prevail."
Whether that happens or not, you have to wonder why Intuit is filing an appeal at all. Taking the federal government to federal court isn't simple or cheap. As Intuit points out in its statement, there was no fine attached to the FTC's order so the decision won't financially affect the company. All it has to do to comply with the order is to stop publishing ads that say TurboTax is free, unless those ads also say what percentage of customers will in fact get it for free.
The thing is--Intuit is already doing that. It stopped showing its "free, free, free" video ads back in 2022. And, perhaps in anticipation of this week's ruling, current TurboTax ads no longer say "FREE Guaranteed." They still say "FREE" and "$0 to File," but now there's a little more information underneath: "~37% of taxpayers qualify. 1040 & limited credits only."
Asked for comment, a company representative told Inc., "Intuit is appealing because the Commission's order is wrongly decided and because the challenged ads were clear and fair."
By pushing on with this fight to federal court, the company has guaranteed at least one more spate of headlines about how it deceived customers--even if it does win in the end. Perhaps Intuit's leaders think their customers don't find the ads deceptive, or don't really care if they are. Or maybe they think those customers pay no attention to headlines. None of those is a particularly safe bet. If you're leading a business, don't make the same mistake.
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TurboTax Advertised 'Free' Tax Prep When Most Customers Had to Pay. It's a Master Class in How to Hurt Your Own Brand
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25.01.2024
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On Monday, the Federal Trade Commission told TurboTax Maker Intuit that it is not allowed to advertise its products as "free" unless they actually are free to all customers--or unless it discloses within the ad what percentage of customers will get it for free. That order is the latest development in a battle over TurboTax ads that's been going on for more than four years. Intuit now says it will appeal the FTC's decision in federal court.
It's almost as if the company is out to get as much bad publicity and as pile up as many legal bills as it possibly can. If you're an entrepreneur or business leader, it's basically a case study in how to undermine your own brand. Intuit is a huge company with very deep........
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