Intuit Wins Court Battle, Lifts TurboTax Ad Restrictions

An appeals court has overturned the Federal Trade Commission's (FTC) attempt to sanction Intuit for allegedly misleading advertisements promoting TurboTax as free. This ruling comes in the wake of an FTC decision under then-Chair Lina Khan, which determined that Intuit's advertising violated U.S. law due to a lack of clear disclaimers, falsely suggesting that TurboTax was free for the majority of taxpayers.

The FTC's chief administrative law judge found that Intuit's claims misled consumers since, in reality, about two-thirds of taxpayers could not file for free. Following this, Intuit appealed the ruling in the conservative-leaning U.S. Court of Appeals for the 5th Circuit, where it secured a unanimous victory last Friday.

The court stated, "Following the Supreme Court’s decision in SEC v. Jarkesy, we hold that adjudication of a deceptive advertising claim before an administrative law judge violated the constitutional separation of powers." This ruling aligns with the Supreme Court's June 2024 decision that indicated the Securities and Exchange Commission's process for imposing fines infringed on the right to a jury trial.

The 5th Circuit panel emphasized that the FTC must address deceptive advertising claims in federal courts rather than through its administrative process. Circuit Judge Edith Jones, who authored the ruling, stated that dismissing the case against Intuit was premature, asserting that the FTC's enforcement actions must continue in federal court.

Intuit's regulatory environment is now more favorable under the Trump administration, following the dismissal of the Democratic FTC members and the confirmation of Republican commissioners. Chairman Andrew Ferguson, who supports the previous administration's stance on the Jarkesy ruling, leads the FTC.

In response to the ruling, Intuit expressed satisfaction, with General Counsel Kerry McLean stating, "I’m thrilled that, once this matter returned to a neutral decision-maker, common sense carried the day." The company has consistently labeled the FTC’s allegations as unfounded and highlighted its efforts in assisting taxpayers over the past 12 years.

Despite the court acknowledging that TurboTax offers a free edition, it noted that most users do not qualify for it. The ruling pointed out that Intuit ceased the specific ads in question but highlighted the potential long-term implications of the FTC's cease-and-desist order, which could restrict advertising practices for the next two decades.

The court concluded that the FTC's claims are traditional legal matters, requiring adjudication in an Article III court, thereby rejecting the agency's assertion that such claims fall under public rights. The ruling reinforces the precedent established in Jarkesy, reiterating that matters involving private rights must be resolved in court.

This precedent not only benefited Intuit but is also relevant in a case involving AT&T, Verizon, and T-Mobile, which are contesting the FCC's authority to impose fines for selling customer location data without consent. The outcomes of these cases could significantly impact how federal agencies enforce regulations.