A recent ruling by an administrative judge at the Federal Trade Commission (FTC) has dealt a blow to Intuit Inc., the maker of TurboTax. The company, however, has stated that it intends to fight the case and will appeal the decision to the FTC Commissioners and potentially to a federal court of appeals.
In its 10-K filing, Intuit made it clear that it will continue to defend its position on the merits of the case. The company remains confident that there will be no significant impact on its business as a result of the ruling, which carries no monetary penalty.
Intuit’s spokesman, Rick Heineman, expressed disappointment with the FTC’s decision, calling it “groundless and seemingly predetermined”. He emphasized that the company has always been transparent with customers regarding costs.
It is worth noting that in a separate legal action, Intuit had previously settled with state attorneys general for $141 million to resolve allegations of deceptive advertising. However, Intuit did not admit liability as part of the settlement.
The FTC has not yet commented on the recent ruling. This comes after the regulator had sued Intuit in March 2022, seeking to halt commercials that repeatedly advertised “free” services. Some of these ads were pulled by Intuit before the filing season ended, and a federal judge in San Francisco later determined that an emergency halt was unnecessary given the circumstances.
As Intuit prepares for its appeal, the outcome of this case will continue to be closely watched both by consumers and within the industry.
FTC Files Complaint Against Intuit’s TurboTax Advertising
The Federal Trade Commission (FTC) has lodged an internal administrative complaint against Intuit for its misleading advertising of TurboTax. In the complaint, the FTC lawyers expressed their concerns about Intuit’s dissemination of ads on television, radio, and online platforms. They argued that these ads created the false impression that consumers could use TurboTax for free, even though the majority of taxpayers do not qualify for Intuit’s free offerings.
This legal battle occurs in the midst of a larger dispute over free tax preparation services. The Internal Revenue Service (IRS) plans to test its own pilot program in the upcoming filing season, which would allow taxpayers to file their taxes directly with the IRS instead of relying on tax preparation companies or individual preparers.
However, TurboTax and the tax software industry are opposed to the proposed IRS direct file system. Congressional Republicans share this viewpoint, further exacerbating the ongoing conflict.
Another point of contention in the government shutdown debate is the funding allocated to the IRS. The House appropriations bill seeks to prohibit the IRS from using any funds to develop the direct file system.
Despite these legal and political challenges, Intuit Inc. saw a 1.4% increase in its shares as of Friday’s closing, reaching $549.60. Interestingly, this disclosure did not significantly impact the company’s shares in after-hours trading. Year-to-date, Intuit’s shares have risen by 41%, outperforming both the Dow Jones Industrial Average (up 5%) and the S&P 500 (up 17.6%).
In conclusion, the FTC’s complaint against Intuit sheds light on the deceptive advertising practices surrounding TurboTax. As taxpayers await the IRS pilot program, the industry’s opposition and budgetary debates continue to shape the landscape of tax preparation.
