Nine takeaways from the initial decision on Intuit’s TurboTax move

A preliminary decision on administrative action challenging alleged deceptive “free” claims about Intuit’s TurboTax product has just been released, and the detailed 237-page opinion is a must-read for anyone in the advertising field. Before you have time to digest the administrative law judge’s ruling, we think this excerpt illustrates why we believe the ruling is a major victory for American consumers:

“Complaining counsel has demonstrated that Respondent engaged in deceptive advertising in violation of Section 5. Many of the widely circulated TurboTax advertisements stated, explicitly or implicitly, that consumer viewers would be able to file their taxes online for free using TurboTax, but for a large number of them For some consumers, this is simply untrue. Respondents claim that disclosures of the conditions and qualifications for the free online application offer are often not conspicuous, unclear, or insufficient to inform a reasonable viewer of the terms or modifications of the offer.” Free” dominant message.

Intuit’s promotion of TurboTax as “free” has become ubiquitous. In fact, some of the national TV ads in Intuit’s “Power of Free” campaign do little more than repeat the word “free” over and over again. According to the administrative law judge, Intuit deceived consumers with its false “free” filing claims, given that approximately 100 million people, or about two-thirds of filers, are not eligible for “free” filing. You’ll need to read the preliminary decision to get the full picture (including encyclopedic citations of relevant case law), but here are some key points we think are worth highlighting.

The staff’s commitment to truth in advertising nationwide is unwavering. The Bureau of Consumer Protection is a relatively small office, but we patrol a broad enforcement area. This includes challenging claims widely circulated by major national advertisers. What is the scope of Intuit’s activities? According to the preliminary decision, the “free” ads were shown at least 84,356 times on 721 television networks. These totals do not include online communications that generated billions of impressions, nor do they include communications via YouTube, Facebook, Twitter, email, etc. Initial decisions are just that—initial decisions. But even at this stage of litigation, this case demonstrates that we will not back down when it comes to protecting consumers from deception.

Advertisers should use caution when using the term “free.” The preliminary decision cited the FTC’s famous Book Club of the Month Case in point: “The word ‘free’ is a lure. It’s bait. It’s like a powerful magnet that attracts the best of us to ‘get something for nothing’ against our will.” As ALJ puts it, “Given that ” “The power of free messaging is particularly strong in the need for advertisers to provide clear and prominent messaging that exposes any restrictions or conditions.”

It is unwise to rely on so-called “disclosures” to correct deceptive claims. In response to Intuit’s argument that its ads contained alleged disclosures that effectively modified its “free” claim, the preliminary ruling took a closer look at that argument. In dismissing the company’s claim, the ALJ reviewed the wording of the alleged disclosures, font size, font color, juxtaposition with other statements, on-screen position and length of time, placement at the end of certain ads and other relevant factors. The conclusion: “Defendants claim that disclosures of the conditions and qualifications for free online application offers are often inconspicuous, unclear, or insufficient to inform a reasonable viewer of the terms of the offer or to modify the leading message of ‘free.'” Specifically. , the ALJ found that “use of the phrase ‘simple return’ was an ineffective disclosure because it failed to convey to consumers that they may not meet TurboTax’s eligibility criteria and did not eliminate their error in thinking they were eligible. Impression.” You can file it for free through TurboTax. “

Before making unqualified claims, consider consumer perceptions. In the terms of the FTC, an “ineligible” claim is a claim without conditions or limitations, while a “qualified” claim comes with limitations.Quote Removatron v. FTCthe administrative judge held that “qualifications must be clear so as to ‘change the apparent meaning of the claim and leave an accurate impression. Any shortcoming may create contradictory double meanings and thereby cause confusion.'” The preliminary ruling adopted the view that “in To the extent that defendant’s advertising could be construed as conveying anyone Providing viewers with free offers that are not eligible or qualifying offers that may not apply to viewers, and this ambiguity will be interpreted against advertisers. “

Don’t rely on prepare for exam Statements such as “see details” can change the information consumers get from an ad. Intuit urges that language such as “see details” or “see if you qualify” in its ads and on the TurboTax website is enough to inform consumers that a “free” offer is not necessarily free for them. The ALJ rejected that argument, finding that such statements were “unlikely to change the overall net impression of the advertisement.” At best, such messages create ambiguity in the respondent’s dominant “free” message rather than substantively modify it. “

The potential complexity of a transaction does not prevent a company from meeting established truth-in-advertising standards. FTC case law states that an advertiser violates the FTC Act if the advertiser induces initial contact with a consumer through deception (sometimes called “deceptive door-opening”) “even if the buyer later has full knowledge before entering into the contract.” . Intuit argued it should be exempt from the standard because online tax filing is a complex product and consumers don’t expect to see all qualifying details in ads. The preliminary ruling rejected that defense, stating that “the FTC has no cases indicating that the deceptive door-opening rule does not apply to transactions conducted online rather than in a brick-and-mortar store.”

Don’t think that getting people to your site for more information will eliminate deception. Intuit further argued that it recommended that consumers visit its website for more information and that phrases such as “View details” or “See if you qualify” were sufficient notice that people could visit the TurboTax website and click on various hyperlinks And view the pop-up for complete information on free application eligibility. The preliminary judgment cited three reasons why the argument was unpersuasive. “First, this assertion flies in the face of the persuasiveness of the evidence . . . suggesting that at least a substantial portion of consumers could reasonably and in fact have been dispelled by respondents’ advertising from the false impression that they could file their taxes for free with TurboTax.” Second. , “Even though some consumers may choose to conduct research on advertising claims, the law protects those who do not:”[T]The public is under no obligation to make reasonable inquiries into the veracity of advertisements. ” and “Third, the information provided on Intuit’s website cannot be used to refute or correct false claims contained in other advertisements. ” In short, what happened on the site does not cure deceptive door openers.

If a true explanation of important terms that qualify an advertising claim would cause consumers to suffer “information overload,” reconsider your claim. Intuit argued that disclosing the material eligibility requirements for free tax returns in its ads would harm consumers by confusing them with “information overload.” The preliminary decision provides a strong rebuttal to this argument: “Furthermore, because it would be difficult for Intuit to effectively communicate all of the important eligibility requirements for Intuit’s free tax return product, the solution is to avoid claims that would trigger such clarifying disclosure requirements.”

Intuit isn’t changing its advertising enough. Intuit filed an affirmative defense, saying the FTC case was moot because “Intuit has ceased its alleged unfair and deceptive advertising campaigns…” . . ”. The company’s argument is based in part on a May 2022 settlement with the attorneys general of 50 states and the District of Columbia that resolved an investigation into the company’s marketing of its online tax preparation products. Intuit urges that the settlement effectively prohibits the recurrence of the violations alleged in the complaint. You’ll need to read the preliminary decision for details, but here are the key takeaways: “[T]The facts do not show that defendants voluntarily ceased all conduct found to be unlawful, nor do they demonstrate that the state settlement will prevent defendants from engaging in such unlawful conduct in the future. Accordingly, the respondent’s frivolous defense is dismissed. “

Of course, the preliminary ruling does not end pending litigation. We’ve only included a handful of the many quotes, which is why this is a point worth a yellow highlighter and your undivided attention.