Last week, the Federal Trade Commission (FTC) won a large battle in its extended war with Intuit, the makers of TurboTax tax-preparation software. An administrative law judge (ALJ) issued a lengthy initial decision, ruling that Intuit’s advertisement of a TurboTax offering as “free” was deceptive, ordering Intuit to cease and desist future advertising related to “free” claims. Specifically, Intuit is prohibited from representing that any good or service is “free,” unless it is free for all consumers and the advertisement clearly and conspicuously discloses any terms that would limit the offer. The ALJ’s ruling is subject to appeal to the full commission.

Here are some key takeaways for advertisers from the more than 200-page opinion:

Robust Disclosures Are Needed for Any “Free” Claims

Advertisers that want to make “free” claims, while minimizing their risk of FTC attention, need to include clear and conspicuous disclosures highlighting any applicable conditions that impact the availability of the “free” offer.

In the Intuit proceeding, the FTC argued that Intuit’s “free” claims were deceptive because most consumers did not qualify for the “free” program, and Intuit failed to clearly and conspicuously disclose that to consumers. According to the FTC, the “free” tax return program was free to consumers only if their tax return qualified as “simple”—a standard only one-third of taxpayers satisfied. Intuit responded that any “free” claims were sufficiently disclosed. Ultimately, the ALJ agreed with the FTC, finding that any disclosures Intuit included were “virtually lost” in the surrounding information and were therefore inadequate.

Avoid Relying on Boilerplate Language to Alter a Message Taken from an Advertisement

Advertisers should be wary of relying on boilerplate disclosures linked to disclaimers such as “see details” and “find out more.” The FTC rejects such schemes as failing to meet the clear and conspicuous disclosure requirement in most instances.

Intuit had contended that its repeated use of links to “find out more” in its advertising campaigns sufficiently communicated that the “free” product offering was conditional. The ALJ held these statements were not enough to counter the broader “free” messaging and reasoned that boilerplate language in general is unlikely to ever be sufficient to alter the broader message of an advertisement.

Avoid Treating Your Website Like a Safety Net

Advertisers should be wary of relying on disclaimers contained on one advertisement medium to cure arguable deception on another medium. In other words, if a television advertisement is considered deceptive, a website that provides all necessary and accurate information will not cure that deception.

Throughout the proceeding, Intuit relied heavily on the robust disclaimers on the TurboTax website to clarify any ambiguity regarding the “free” claims shown in television advertisements, highlighting the website’s color-contrasted hyperlinks, pop-up screens with various disclaimers, and other clarifying information. The ALJ rejected this cure argument for several reasons.  

One key reason was that customer survey evidence demonstrated that actual customers believed TurboTax was unconditionally free even after viewing the website, so the alleged deception was not actually cured.

The ALJ also ruled that Intuit’s television ads constituted a deceptive “door opener,” which cannot be cured by giving truthful information afterward. Intuit attempted to avoid the deceptive door opener argument by arguing that the complexity of online tax returns meant reasonable consumers did not expect to see an “information overload” of all qualifying details in every ad. The ALJ rejected this position, stating instead that companies concerned about information overload should simply avoid advertising claims that trigger the need for clarifying disclosures.

The ALJ also reasoned that the public is under no responsibility to investigate the truth of advertising claims, holding that correct information in some advertisements cannot be used to counter a deceptive claim contained in other advertisements.

Intuit has already stated that it intends to appeal the decision, which could include an appeal to the full commission and then to a Federal Court of Appeals. We’ll continue to monitor this matter as it moves through the appeals process.

To stay on top of these developments, bookmark our All About Advertising Law blog and subscribe to our monthly newsletter. To learn more about Venable’s Advertising Law services, click here.

* The authors thank Micah Wallen, an associate in Venable’s Washington, DC office, for his assistance in writing this article.

On September 19, Sam Levine, the director of the Federal Trade Commission’s Bureau of Consumer Protection, outlined the agency’s priorities at the annual conference of the National Advertising Division. Here are the highlights:

Levine outlined three pillars of the enforcement agenda:

  • Focus on the practices that cause the most consumer harm
  • Obtain relief that not only halts the violative conduct but also changes incentives to engage in such conduct in the future
  • Use tools beyond case-by-case enforcement to change behavior (think rule making)

After also noting that the pace of enforcement at the FTC had increased, Levine then focused on some substantive areas of concern, starting with junk fees and dark patterns.

Continue Reading FTC Consumer Protection Chief Sam Levine Outlines FTC Priorities at the NAD Conference

The FCC has released an Order on Reconsideration resolving petitions that asked the Commission to reconsider or clarify certain broadband labeling requirements. Please see our summary of the original broadband labeling requirements. In the new Order, the FCC:

  • Affirmed Broadband Providers’ Obligation to Itemize Fees: The FCC affirmed that providers must itemize any fees added to base monthly prices, including any fees related to government programs they choose to pass through to consumers. Merely stating “additional fees may apply” or that “fees may vary by location” will not be sufficient. Note that if a provider does not itemize additional fees but just incorporates them into their monthly price, it can simply state “None” on the label.
  • Affirmed Broadband Providers’ Obligation to Fully Describe Data Allowances: The FCC affirmed that providers should keep their descriptions of data allowances simple, and only describe the details in their more complete service descriptions in advertising materials and on their websites. A request that providers be able to use multiple lines of data allowance descriptions on the label was denied. The FCC clarified that in disclosing charges for additional data or deductions in service for using data in excess of the amount on the plan, providers are required to associate the increments of additional data and additional charges with the data tier of the data cap on the label.
  • Affirmed That Enterprise Offerings Are Not Covered by the Labeling Requirement: The FCC affirmed that enterprise broadband offerings are not mass-market retail services covered by the labeling requirement.
  • Reconsidered the Documentation Requirement for Interactions with Consumers at Alternative Sales Channels: The FCC reconsidered the requirement that a broadband provider document every instance when they direct a consumer to a label at an alternative sales channel and retain such documentation for two years. This requirement will now be deemed satisfied if the provider (1) establishes the business practices and processes it will follow in distributing the label through alternative sales channels; (2) retains training materials and related business practice documentation for two years; and (3) provides such information to the Commission upon request, within 30 days.
  • Clarified Provider Flexibility in Identifying Taxes: The FCC clarified that a broadband provider has the flexibility to state “taxes included” when it has chosen to include taxes as part of its monthly base price.

Last week, the Federal Trade Commission (FTC) and six states permanently banned Roomster Corp. and its owners, John Shriber and Roman Zaks, from purchasing or incentivizing consumer reviews as part of a settlement over charges that they utilized fake reviews to lure consumers into paying for access to nonexistent rental listings. The settlement comes in the middle of a public notice and comment period for the proposed rule by the FTC on fake reviews that would cover much of the conduct alleged of Roomster.  

According to the complaint, Roomster allegedly bought tens of thousands of fake reviews that were used to funnel unwitting customers to the company’s rental listings, which often ended up being fake or nonexistent.

Continue Reading Bad News for Fake Reviews: FTC Issues Permanent Ban on Roomster

The Seventh Circuit has once again weighed in on the scope of the Federal Trade Commission’s (FTC’s) remedial authority. The case, FTC v. Credit Bureau Center, LLC, has had, in the words of the court, “a long and winding journey through the federal courts, including a trip to the Supreme Court and back.” Last week’s decision focused on monetary relief under Section 19 of the FTC Act—specifically, on how to calculate redress under Section 19 and whether monetary relief imposed under Section 19 can be deposited into the U.S. Treasury as disgorgement.

The lower court entered a judgment of $5,260,671.36, which equaled Credit Bureau Center’s total revenues minus refunds already paid and chargebacks. On appeal, Credit Bureau Center argued that a monetary award under Section 19 must be limited to net profits that can be traced to the underlying fraud (as opposed to net revenues). Credit Bureau Center relied on Liu v. SEC, 140 S. Ct. 1936 (2020), in which the Supreme Court found that a disgorgement award could not exceed a firm’s net profits from wrongdoing. The Seventh Circuit rejected this because Section 19—unlike the statute at issue in Liu—explicitly permits the refund of money to make consumers whole, and, therefore, relief under Section 19 is not limited to the traditional scope of remedies available in equity. 

Continue Reading Another Day, Another Decision Interpreting Section 19 of the FTC Act

Cybersecurity and data protection is front and center on the Federal Communications Commission’s (FCC) agenda. The latest manifestation of this is the FCC’s issuance of a Notice of Proposed Rulemaking (NPRM) on August 25, 2023, which seeks comments on a proposed voluntary cybersecurity labeling program for Internet of Things (IoT) devices or products.

Companies that volunteer to join the proposed program would have their qualifying products bear a new “U.S. Cyber Trust Mark,” which the agency believes would help consumers identify trustworthy products and make informed purchasing decisions, incentivizing better cybersecurity standards. There are a couple of aspects of the NPRM that are worth highlighting.

Continue Reading What’s in a Label? FCC Begins Rulemaking Procedure for Cybersecurity Labeling on IoT Devices

As we covered previously, courts are coming around to reading Section 19 of the FTC Act more narrowly than the Federal Trade Commission may hope. In the latest instance, on June 9, 2023, a magistrate judge in the Southern District of Texas issued a report and recommendation rejecting the FTC’s claim for consumer redress, even after finding there was consumer injury. The report and recommendation were adopted by the district judge on August 3.

In Federal Trade Commission v. Zaappaaz, LLC, the FTC argued at summary judgement, and the court agreed, that the defendants violated the Merchandise Rule by falsely advertising shipping speeds of personal protective equipment and refusing to offer refunds. For these rule violations, the FTC further argued that the appropriate measure of consumer redress under Section 19 was net revenue of the PPE sales—$37,549,472.14. In denying the FTC’s request for net revenue, the court distinguished between requiring the agency to demonstrate individual reliance as a means of proving consumer injury and the amount of compensation necessary to redress that consumer injury.

Continue Reading Following <em>Noland</em>: Another District Court Tightens the Reins on the Scope of Consumer Redress

Last week, the Federal Communication Commission’s (FCC) issued a Notice of Apparent Liability for Forfeiture proposing a $20 million forfeiture, essentially a fine, against two telecommunications service providers for failing to properly authenticate customers’ identity before providing online access to Customer Proprietary Network Information (CPNI). CPNI includes sensitive data, such as called phone numbers, the length and time of calls, and service features. FCC rules mandate that companies handling such information use “reasonable measures” to guard access to CPNI.

Because it would be easy for third parties to impersonate customers and gain access to their CPNI, FCC rules prohibit the use of readily available biographical information or account information. “Readily available biographical information” includes “information drawn from the customer’s life history and includes such things as the customer’s social security number . . . mother’s maiden name; home address; or date of birth.” Account information is “information that is specifically connected to the customer’s service relationship with the carrier, including such things as an account number or any component thereof, the telephone number associated with the account, or the bill’s amount.” FCC rules thus requires service providers to authenticate customer identity without the use of the above information and then require a password.

Continue Reading FCC Proposes $20 Million Forfeiture Against Telecommunications Service Providers for Failing to Protect User Data

Marketers and lead generators have new guidance in the form of enforcement orders on what the Federal Trade Commission (FTC) appears to consider required practice when obtaining consumer consent prior to the sale, transfer, or disclosure of consumer information that will be used in marketing.

The upshot is that the FTC provided several affirmative requirements it would want to see relating to the sale, transfer, or disclosure of consumer information by lead generators, including when obtaining consumer consent prior to transfer to a third-party marketer. But the FTC has also taken direct aim at the use of hyperlinks used to make disclosures of the identities or names of persons to whom the information will be sold and other information, prior to the consumer providing consent, a step taken by many lead generators to avoid violating the FTC Act and the Telemarketing Sales Rule (TSR).

The FTC and other federal and state law enforcement partners recently announced “Operation Stop Scam Calls.” A focus of the announcement was several enforcement actions against marketers and lead generators, including actions where the FTC alleged the defendants acted as “consent farms,” which, in the FTC’s opinion, improperly obtained consumers’ consent by using deceptive ads and “dark patterns” to trick consumers into providing their personal information and consenting to receive prerecorded calls and other marketing solicitations.

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As we recently previewed, the Federal Communications Commission (FCC) published its Proposed Rule that would codify its updated guidance on the Telephone Consumer Protection Act (TCPA). The TCPA regulates calls and text messages sent using automated technology and is frequently litigated. Below are the major proposed rule changes on which the FCC seeks comment.

Continue Reading FCC Releases Proposed Rule for Codifying Updates to the TCPA