By Jonathan Stempel
March 20 (Reuters) – A U.S. appeals court on Friday threw out a Federal Trade Commission order barring TurboTax maker Intuit from advertising its popular tax preparation software as “free” when many taxpayers are ineligible.
In a 3-0 decision, the 5th U.S. Circuit Court of Appeals in New Orleans said it violated the constitutional separation of powers for an FTC administrative law judge to decide deceptive advertising claims.
Intuit had been appealing a January 2024 FTC order, which followed an earlier ruling from an administrative law judge, barring it from marketing any service as free unless it was free to everyone, or the company clearly disclosed what percentage of taxpayers qualified.
The FTC said Intuit deceived consumers during six years of marketing into believing all TurboTax products were free, with some ads saying TurboTax was “free, free, free, free.” It called the character of the Mountain View, California-based company’s violations “egregious.”
Intuit had advertised its TurboTax Free Edition across a variety of media, but usually said the product was free only for taxpayers with “simple” returns.
Circuit Judge Edith Jones wrote for the appeals court that the FTC must pursue deceptive advertising claims in federal courts, where the agency may face a higher burden of proof.
She cited a 2024 U.S. Supreme Court decision curbing the Securities and Exchange Commission’s use of in-house judges to enforce laws.
Jones called it premature to grant Intuit’s request to dismiss the FTC case. She returned the matter to the FTC for further proceedings.
The FTC did not immediately respond to requests for comment. In a blog post, Intuit general counsel Kerry McLean said the FTC claims were meritless, and the company said it has “always been clear, fair and transparent” with customers.
(Reporting by Jonathan Stempel in New York; Editing by Mark Porter and Diane Craft)
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