Don’t Say Free Unless It’s Actually Free
Everybody loves to get something for free. So in your marketing, why not give something away for free, and market it? That’s not a bad idea—so long as you are actually giving something away for free. Otherwise, as software tax provider Intuit (TurboTax) is now learning, the government could start to come after you.
FTC Sues Intuit
The Federal Trade Commission has filed a complaint against Intuit, alleging that the company advertised free tax filing services, when in fact few consumers could actually utilize the free filing.
Many taxpayers who were paid through 1099s, who sold property in the previous year, who have small business income, those who earn farm income, and others, did not qualify for the free filing services—the lawsuit alleges about 2/3 of filers could not use the free service.
Taxpayers would spend the time uploading documents and inputting information, only to find at the last minute that they had to upgrade to a paying filing system, because they did not qualify for the free filing.
Misuse of the Word “Free”?
The government says that the company was using the “free” word to lure customers in, and then when it was time to file, many were hit with unexpected charges. There was very small disclaimer language in many ads, saying that the free filing was limited to “simple” returns, but the FTC says that these inconspicuous disclaimers were not sufficient. The disclaimer language was generally very small, and hard to see in front of Intuit’s blue background on their advertisements.
Intuit ran ads touting the free services during super bowls and in multimillion dollar advertising campaigns. A screen shot from one such ad shows the word “free” being flashed numerous times on the screen.
Some taxpayers actually can file their taxes for free, usually people making less than $73,000 (more information is available at irs.gov/freefile). However, this was not the impression given by the ad campaign. In fact, the lawsuit alleges that many people who were told they had to pay Intuit to file could have filed their taxes for free at the IRS’ website.
Intuit now potentially faces both an administrative law complaint, as well as a complaint that will be filed in the federal court system.
Be Careful with “Free”
For its part, Intuit says it will challenge the government’s allegations. However, the case is a lesson in the “freemium” system.
It is common nowadays to give away services for free, and then hope that consumers add on paid services. That’s fine, and legal, so long as all disclosures are made (and those disclosures can actually be seen and read). Any advertising promoting a free product or service should be reviewed by an attorney, to make sure that there are no deceptive advertising problems.
Call the West Palm Beach business litigation attorneys at Pike & Lustig today to make sure your business is in compliance with government regulations.