Fifth Circuit Vacates FTC's Cease-and-Desist Order Against Intuit

The Fifth Circuit Court of Appeals unanimously vacated the Federal Trade Commission's cease-and-desist order against Intuit.

“An appeals court invalidated the Biden-era Federal Trade Commission’s attempt to punish Intuit for allegedly deceptive ads that pitched TurboTax as free”

Ars Technica

The 3-0 decision was written by Circuit Judge Edith Jones.

Ars Technica

The ruling found that Intuit's TurboTax 'Free Edition' advertising was deceptive because it was marketed as free but only available to taxpayers with 'simple tax returns'.

The court determined the FTC cannot adjudicate deceptive advertising claims through its internal administrative process.

Instead, the FTC must pursue such enforcement actions through federal district courts under Article III.

Intuit had sought reversal of the FTC's cease-and-desist order with instructions to dismiss, but the court found dismissal premature.

The Fifth Circuit's legal reasoning centered on applying the Supreme Court's June 2024 ruling in Securities and Exchange Commission v. Jarkesy.

The Jarkesy decision established that adjudication of claims involving 'private rights' must occur in Article III courts.

EconoTimes

The court determined that deceptive advertising claims under Section 5 of the FTC Act are 'in their nature' traditional actions at law and equity.

These claims closely mirror common law torts of fraud and deceit recognized as far back as 1789.

Applying the four Jarkesy factors, the court found deceptive advertising claims target the same basic conduct as common law fraud.

The claims also employ 'classic terms of art associated with fraud and deceit' and operate under similar legal principles.

The ruling carries significant practical implications for both the FTC and Intuit.

“In a significant decision with wide-ranging implications for FTC enforcement on Friday, the U”

JD Supra

The court granted Intuit's petition for review, vacated the FTC's cease-and-desist order, and remanded the case.

The case must now proceed through traditional judicial processes in federal district court.

On remand, the FTC faces several challenges including potentially higher proof standards.

The FTC must also justify the necessity of any order since Intuit stopped running challenged ads years ago.

The scope and twenty-year duration of the original order must be reconsidered.

The decision highlights changing regulatory landscape under Trump administration.

Trump fired both Democratic FTC members, leaving only Republican commissioners.

Judge James Ho concurred fully with the majority opinion but wrote separately.

Ho articulated what he characterized as a much larger structural constitutional crisis.

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The crisis is posed by the FTC's very existence and structure.

Ho concluded that the FTC impermissibly combines all three forms of governmental power.

These powers include executive enforcement, legislative rulemaking, and judicial adjudication.

Ho argued this combination occurs in a single, largely unaccountable agency.

He invoked James Madison's Federalist No. 47 about the accumulation of powers.

Ho's opinion serves as both substantive legal analysis and a signal about administrative law's trajectory.

The Fifth Circuit was careful to confine the scope of its ruling.

“An appeals court invalidated the Biden-era Federal Trade Commission’s attempt to punish Intuit for allegedly deceptive ads that pitched TurboTax as free”

Ars Technica

The decision explicitly addresses solely the FTC's authority to adjudicate deceptive advertising claims under Section 5.

Ars Technica

The court emphasized the ruling does not apply to FTC's competition authority.

It also doesn't apply to broader 'unfair or deceptive acts or practices' beyond deceptive advertising.

This limitation leaves FTC's authority over other claims as an open constitutional question.

This question will likely be the subject of future litigation.

The ruling represents a significant victory for businesses challenging administrative enforcement.

It signals a judicial trend toward reasserting Article III courts' exclusive jurisdiction.