GoKawiilAn appeals court invalidated the Biden-era Federal Trade Commission’s attempt to punish Intuit for allegedly deceptive ads that pitched TurboTax as free.
Under then-Chair Lina Khan, the FTC determined in 2024 that the TurboTax maker violated US law with deceptive advertising and ordered it to stop telling consumers, without more obvious disclaimers, that TurboTax or other products are free. The FTC’s chief administrative law judge had previously found that Intuit’s ads violated prohibitions on deceptive advertising because the firm “advertised to consumers that they could file their taxes online for free using TurboTax, when in truth, for approximately two-thirds of taxpayers, the advertised claim was false.”
Intuit appealed in the conservative-leaning US Court of Appeals for the 5th Circuit and got a resounding victory on Friday in a 3–0 ruling issued by a panel of judges. “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,” the 5th Circuit panel said.
The Supreme Court’s June 2024 ruling in Securities and Exchange Commission v. Jarkesy held that the SEC system for issuing fines violated the right to a jury trial. The 5th Circuit panel said the Jarkesy decision confirms that the FTC must pursue deceptive advertising claims in courts rather than its own administrative process.
Intuit says it’s “thrilled”
The ruling, written by Circuit Judge Edith Jones, said that dismissing the case against Intuit would be premature because the claims can be tried in court. Jones wrote:
Intuit seeks reversal of the FTC’s cease-and-desist order with instructions to dismiss. Dismissal is premature. We hold that FTC’s enforcement action must proceed in federal court. Several consequences may follow from this: the standard of proof required on remand may be elevated from substantial evidence to a preponderance; the agency will have to explain the necessity of any order, given that Intuit stopped running the offending ads years ago; and the practicability, scope, and longevity of a cease-and-desist order will have to be reconsidered.
Intuit now faces more friendly regulators under the Trump administration than it did under Biden. Trump fired both Democratic members of the FTC, leaving it with only Republican commissioners, and the Supreme Court has so far declined to overturn Trump’s action.