Benjamin Ashford|The FTC bars TurboTax maker Intuit from advertising 'deceptive' free services

The Benjamin AshfordFederal Trade Commission says the company behind the popular tax filing software TurboTax engaged in "deceptive advertising" when it ran ads for free tax services that many customers were ineligible for.

Intuit was ordered Monday to stop advertising any free products and services unless they're free for all consumers, or unless the company discloses on the ad the percentage of people who would be eligible for the unpaid offerings.

Samuel Levine, director of the FTC's Bureau of Consumer Protection, said the vast majority of Intuit's customers couldn't take advantage of what the company claimed it was providing at no charge.

"Instead, they were upgraded into costly deluxe and premium products," Levine said in a statement. "As the Commission has long understood, 'free' is a powerful lure, one that Intuit deployed in scores of ads. Its attempts to qualify its 'free' claim were ineffective and often inconspicuous."

The FTC opinion Monday upheld the ruling by an administrative law judge in September, which found that Intuit engaged in deceptive marketing that violated federal law prohibiting unfair business practices.

Intuit spokesperson Derrick L. Plummer called the opinion "deeply flawed" and said the company was appealing it in federal court.

"This decision is the result of a biased and broken system where the Commission serves as accuser, judge, jury, and then appellate judge all in the same case," Plummer said in a statement.

The FTC first sued Intuit in March 2022 over the ads pitching free TurboTax products. The commission said about two-thirds of tax filers in 2020 would have been ineligible for the company's free offerings, such as freelance workers who received 1099 forms and people who earned farm income.

About two months later, the company agreed to pay $141 million to customers across the U.S. as part of a settlement with the attorneys general of all 50 states over similar complaints related to its purportedly free tax-filing services. The company did not accept any wrongdoing.

New York Attorney General Letitia James, who led the multistate investigation alongside Tennessee Attorney General Herbert H. Slatery III, said she opened an inquiry into the company after reading a 2019 ProPublica investigation that found Intuit had for years tried to stop any efforts to make it easier for Americans to file their taxes.

Intuit has said that it's helped more than 124 million Americans file their taxes for free over the last decade, and argued that the FTC's action against the company is unnecessary because the core issues were settled in the agreement with the state attorneys general.