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| 2 minutes read

Learnings from FTC's Ruling Against "Free" Offer Advertising

The FTC made a false advertising complaint against Intuit in March 2022.  It claimed that TurboTax tricked consumers into thinking they could file their taxes free of charge, when they, in fact, had to pay anywhere from $59.99 to $119.99 and the “free” offer was only for those who filed simple tax returns (which was only one-third of all tax filers).

In mid-2023, an administrative law judge found that TurboTax's advertising was false and misleading, and a new decision by the Federal Trade Commission confirms the administrative law judge's view.  In the decision, TurboTax is prohibited from advertising any goods or services for "free" unless it conspicuously discloses the percentage of consumers who qualify.  TurboTax has appealed the decision to the U.S. Court of Appeals for the Fifth Circuit.

The Commission's decision included a great summary of the basics of the FTC's view of advertising law:

  • In determining whether an advertisement is deceptive, the Commission considers (1) what claims are conveyed in the ad; (2) whether those claims are false or misleading; and (3) whether the claims are material.
  • The determination of what claim is conveyed focuses on the overall net impression of the advertisement for the reasonable consumer-viewer, rather than the literal truth or falsity of the words in the advertisement.
  • A representation is considered material if it “involves information that is important to consumers and, hence, likely to affect their choice of, or conduct regarding, a product.
  • An ad is deceptive if it is likely to mislead a significant minority of reasonable consumers.
  • Disclaimers or qualifications in any particular ad are “not adequate to avoid liability unless they are sufficiently prominent and unambiguous to change the apparent meaning of the claims and to leave an accurate impression.”
  • “If a claim conveys more than one meaning, only one of which is misleading, a seller is liable for the misleading interpretation even if non-misleading interpretations are possible.”
  • When claims are reasonably clear from the face of the advertisement, the finder of fact can rely “on its own reasoned analysis” to determine what claims, including implied ones, are conveyed and consumer perception studies are not necessary.
  • If ads induce consumers to visit an advertiser's webpage through false advertising, disclosures on the webpage do not absolve the company of liability for the ads, and using false claims to engage consumers and induce them to further interact with the company is prohibited.
  • Section 5 of the FTC Act requires proof that a claim is likely to deceive, not proof of actual deception, and the FTC is not required to show, through consumer complaints or otherwise, that any one consumer was actually deceived.

(Image source: FTC Complaint against Intuit)


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