FIFTH CIRCUIT — A U.S. Fifth Circuit appeals court unanimously ruled that the Federal Trade Commission's administrative action against Intuit over deceptive TurboTax advertising violated the separation of powers and must be pursued in federal court.

The three-judge panel said the FTC must pursue deceptive advertising claims in federal courts rather than its own administrative process. The court ruled that "adjudication of a deceptive advertising claim before an administrative law judge violated the constitutional separation of powers."

Under FTC Chair Lina Khan, the FTC determined in 2024 that Intuit violated U.S. law with deceptive advertising. The FTC ordered Intuit to stop stating that TurboTax or other products are free without more obvious disclaimers.

The cease-and-desist order prohibits Intuit for the next twenty years from advertising any goods or services as free unless it satisfies specific requirements and applies to all products sold by Intuit. The FTC's chief administrative law judge found that Intuit's advertising falsely claimed that consumers could file their taxes online for free using TurboTax when about two-thirds of taxpayers could not do so, according to public records.

The court noted that "TurboTax 'Free Edition' has been part of the TurboTax range for more than a decade, available to taxpayers for what Intuit refers to as 'simple tax returns.'" The ruling also stated that "Most American taxpayers do not have 'simple tax returns.'"

The Supreme Court's June 2024 ruling in Securities and Exchange Commission v. Jarkesy held that the SEC's system for issuing fines violated the right to a jury trial. Circuit Judge Edith Jones wrote that the FTC's enforcement action against Intuit must proceed in federal court.

The court rejected the FTC's argument that the claims involve public rights that may be adjudicated by administrative agencies. The ruling stated that "The FTC's deceptive advertising claims are traditional actions at law and equity and thus involve private rights that demand adjudication in an Article III court."

"I'm thrilled that, once this matter returned to a neutral decision-maker, common sense carried the day. From the beginning, we were confident in our case and that, when this matter returned to a neutral body like the Fifth Circuit, Intuit would prevail," said Kerry McLean, Intuit's General Counsel.