Michigan AG Nessel Supports FTC’s Action Against Deceptive TurboTax “Free” Claims

Wednesday, June 26, 2024

Michigan AG Dana Nessel and 21 other AGs support the FTC’s order against Intuit, urging the court to uphold the ruling against misleading “free” TurboTax ads.

Michigan Attorney General Dana Nessel, along with a coalition of 21 other attorneys general, has submitted a brief in favor of a Federal Trade Commission (FTC) order against Intuit, the company behind TurboTax. This order prevents Intuit from misleadingly promoting its tax preparation software as “free” when it is not truly free for most users. The brief, filed in the case Intuit v. Federal Trade Commission, urges the United States Court of Appeals for the Fifth Circuit to dismiss Intuit’s appeal and maintain the FTC’s ruling.

“Too many Americans have suffered unnecessary financial losses as a result of Intuit’s deceptive practices, especially low-income families and veterans who were otherwise eligible for free filing services elsewhere,” said Nessel. “I stand firmly with my colleagues in urging the court to uphold the FTC’s decision. We must hold corporations like Intuit responsible for deceptive and misleading advertisements.” 

In 2022, a coalition representing all 50 states and the District of Columbia secured a $141 million settlement from Intuit following state investigations into allegations of deceptive marketing and advertising practices for TurboTax. In 2023, the Federal Trade Commission (FTC) issued an order requiring Intuit to cease advertising its products as “free” unless they were genuinely free for all consumers. Intuit has since appealed this order, seeking to overturn the FTC’s cease and desist directive.

In a brief filed by the coalition of attorneys general, they argue that the court should uphold the FTC’s order against Intuit for several key reasons:

1. Harm to Millions of Americans: The brief outlines how Intuit manipulated search results to direct consumers towards paid tax preparation services, even when they were eligible for free filing under programs for active-duty servicemembers, veterans, and low-income taxpayers. This deceptive practice led to millions of dollars in profits from low-income taxpayers and military families who should have qualified for free services. Additionally, Intuit conducted a multi-year nationwide advertising campaign falsely portraying TurboTax as free, when in reality, it was not free for the majority of users.
2. Correct Application of Consumer Protection Rules: Intuit contended that the FTC made legal errors in applying rules against deceptive business practices. The attorneys general counter this, stating that the FTC accurately applied fundamental consumer protection laws. They argue that Intuit’s persistent claims of offering “free” services were clearly misleading to most consumers. The brief further supports the FTC’s rule prohibiting businesses from making deceptive claims, applicable to all transactions, including those conducted online.
3. Complementary Roles of State and Federal Consumer Protection: Intuit argued that the FTC’s order was redundant given the state settlement. The coalition disputes this, emphasizing that the FTC’s order does not duplicate but rather complements the state settlement. The order includes additional restrictions on Intuit’s misleading practices and mandates specific advertising language to clarify the limited availability of free services. The attorneys general assert that state and federal consumer protection efforts are designed to be complementary, highlighting that it is common for businesses engaging in deceptive practices to face enforcement from both state and federal levels.

By maintaining the FTC’s order, the coalition seeks to ensure continued protection for consumers against misleading advertising practices.

In addition to Michigan, District of Columbia Attorney General Brian L. Schwalb and Illinois Attorney General Kwame Raoul, the brief was filed with support from the attorneys general of Arizona, California, Colorado, Connecticut, Delaware, Hawaii, Maine, Maryland, Massachusetts, Minnesota, Nevada, New Jersey, New York, North Carolina, Oregon, Pennsylvania, Rhode Island, Washington, and Wisconsin.