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FTC presses ahead in its war on 'free' Turbo Tax

US watchdog snubs Intuit's request to drop claims of bait-and-switch tactics

Updated The FTC is pressing ahead with its allegations of false advertising against Turbo Tax maker Intuit after a brief pause in proceedings.

In May, Intuit asked [PDF] the American consumer watchdog to call off its legal action. This was the same month the biz agreed to pay out $141 million to settle a separate lawsuit brought by US states, which had accused the company of the same thing the FTC was looking into. Namely, unfairly advertising Turbo Tax as free to lure in customers only to later strong-arm those folks into paying for the tax filing service.

Since 1999 Intuit has offered a free tax filing service to low-income earners in America; according to the FTC, the software maker has been steadily cutting back on those who are eligible for this free service.

In what the FTC called a "bait-and-switch" operation, Intuit first offers its free version as an option, waits until people have gone through the lengthy process of inputting their personal data, and then most of the time pressures or simply tells users to pay a fee to file the return.

This catches a lot of people out, who expected a free ride and end up forking out for the service to just get it over with. According to the FTC earlier, two-thirds of people filing taxes in 2020 did not qualify for the tier of Turbo Tax's product that was actually free.

Intuit earlier said its settlement with the US states "affords the public all of the material relief the FTC seeks to obtain through this action," and asked the watchdog to "consider whether further litigation is in the public interest." In other words, Intuit asked the FTC to just drop the matter.

No luck on that front, the regulator announced today. The FTC has decided that, yes [PDF], "the public interest warrants further litigation."

The case thus far

The FTC's complaint against Intuit was filed in March, and it sought an injunction to force the Turbo Tax maker to end what the Feds saw as deceptive practices.

"The commission is asking a federal court to put an immediate halt to Intuit advertising and has also authorized the filing of an administrative complaint alleging that the company's practices are illegal," the regulator said back then. That injunction was denied in late April, though, which prompted Intuit to ask the FTC a month later to fuggedaboutit.

Now the FTC has returned the matter to adjudication, and set an evidentiary hearing for March 27, 2023. Until then, both sides will need to spend time recompiling evidence and adding new materials, as the FTC vacated all discovery put forward prior to May 6, 2022.

Intuit, for its part, is ready to continue fighting. In the notice of settlement [PDF] it filed with the FTC in May, the biz said it "did not admit liability in the settlement, and if necessary … will continue to defend its practices in this administrative proceeding." ®

Updated to add

"It is disappointing that the FTC staff has chosen to resume its lawsuit, especially in light of Intuit's settlement with all the state attorneys general, which we believe resolved the core of the FTC's complaint," said Kerry McLean, executive vice president and general counsel of Intuit.

"We believe in the merits of our case and that a neutral decision maker will conclude that we have been clear and fair with our customers."

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