Case 3:19-cv-02546-CRB Document 80 Filed 09/13/19 Page 1 of 43
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`Daniel C. Girard (State Bar No. 114826)
`Angelica M. Ornelas (State Bar No. 285929)
`Simon S. Grille (State Bar No. 294914)
`GIRARD SHARP LLP
`601 California Street, Suite 1400
`San Francisco, CA 94108
`Telephone: (415) 981-4800
`Facsimile: (415) 981-4846
`dgirard@girardsharp.com
`aornelas@girardsharp.com
`sgrille@girardsharp.com
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`
`Norman E. Siegel (pro hac vice)
`Austin Moore (pro hac vice)
`Jillian Dent (pro hac vice)
`STUEVE SIEGEL HANSON LLP
`460 Nichols Road, Suite 200
`Kansas City, MO 64112
`Telephone: (816) 714-7100
`Facsimile: (816) 714-7101
`siegel@stuevesiegel.com
`moore@stuevesiegel.com
`dent@stuevesiegel.com
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`
`Co-Lead Interim Counsel
`
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`UNITED STATES DISTRICT COURT
`NORTHERN DISTRICT OF CALIFORNIA
`SAN FRANCISCO DIVISION
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`IN RE INTUIT FREE FILE LITIGATION
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`This Document Relates to: All Actions
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`Case No. 3:19-cv-02546-CRB
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`CONSOLIDATED CLASS ACTION
`COMPLAINT
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`DEMAND FOR JURY TRIAL
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`CONSOLIDATED CLASS ACTION COMPLAINT
`CASE NO. 3:19-cv-02546-CRB
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`Case 3:19-cv-02546-CRB Document 80 Filed 09/13/19 Page 2 of 43
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`NATURE OF THE ACTION
`1.
`Plaintiffs are United States taxpayers who paid Intuit Inc. for online tax services
`that Intuit agreed to provide for free. Intuit offers online tax preparation software under the
`TurboTax tradename. Pursuant to an agreement with the Internal Revenue Service (IRS), Intuit
`and 11 other tax preparation providers are required to provide free online tax return preparation
`and filing services to a substantial majority of U.S. tax filers, including lower income
`Americans and active duty military servicemembers (the “Free File Program”). In exchange
`for Intuit’s participation, the IRS agreed not to build and publish its own online, free e-filing
`system—a service that would have competed directly with Intuit. The agreed goal of the
`Program is for 70% of U.S. taxpayers to e-file their taxes for free. But as a result of Intuit’s
`nationwide scheme to divert eligible filers to its paid products, less than 3% of eligible
`taxpayers filed for free under the Free File Program in the 2018 tax year.
`2.
`Intuit uses a variety of means to steer taxpayers away from its free e-filing
`offering under the Program. Intuit named the filing software it provides under the Free File
`Program “TurboTax Freedom Edition” while simultaneously promoting a competing product
`that it named “TurboTax Free Edition.” The criteria to file for free using Intuit’s Free Edition
`are not the same as the criteria to file for free using Freedom Edition, however. Free Edition is
`only free for the simplest returns. Most taxpayers who seek to file for free using Free Edition
`must pay tax preparation charges starting at $59.99 or more to complete their returns.
`3.
`If a taxpayer begins the tax filing process using TurboTax’s Free Edition, Intuit
`does not inform the taxpayer that they must pay a fee to file until after the taxpayer has devoted
`considerable time to inputting information into the Free Edition software. In other words,
`Intuit implements a “free-to-fee” scheme to bait customers with the offer of free tax filing
`services but then charge them a fee to complete their return and file. Even if the taxpayer is
`eligible to file for free under the Free File Program, Intuit does not inform the taxpayer of the
`free file option or provide a path to Freedom Edition from Free Edition. Furthermore, Intuit’s
`website, where it advertises Free Edition, contains no link to Freedom Edition.
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`1
`CONSOLIDATED CLASS ACTION COMPLAINT
`CASE NO. 3:19-cv-02546-CRB
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`Case 3:19-cv-02546-CRB Document 80 Filed 09/13/19 Page 3 of 43
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`4.
`Intuit uses pervasive nationwide advertising and email campaigns and
`sophisticated search technology to suppress free filing by directing taxpayers, including those
`eligible to participate in the Free File Program, to its paid products. For example, Intuit made
`the Freedom Edition (i.e., its truly free software) virtually invisible to eligible filers under the
`Free File Program by removing any links to the Freedom Edition from its primary website and
`even altering the Freedom Edition’s website source code to prevent it from appearing in search
`engines like Google. By contrast, Intuit uses different source code to ensure that its paid
`products, including Free Edition, appear in response to Google search requests. Intuit also
`pays Google through Google’s advertising platform to ensure that Intuit’s paid products appear
`at the top of internet search results. Thus, taxpayers who search for terms like “TurboTax
`Free” or “turbo tax free file” or “irs free file taxes” are steered to Intuit’s commercial products
`including Free Edition without being given an option to use the Freedom Edition.
`5.
`Intuit’s practices victimize low-income American taxpayers and military
`servicepeople who are eligible to file their tax returns at no cost under the Free File Program.
`Intuit exploits its superior knowledge of tax laws and regulations, superior access to capital and
`technology, and the confusion, anxiety and frustration associated with payment of income
`taxes to generate billions in revenue from low-income taxpayers—often students, elderly
`people on fixed incomes, and public assistance recipients—and service members who qualify
`to electronically file their tax returns at no charge. Intuit’s conduct in devising and
`implementing a common plan or scheme to divert eligible online filers to its paid products,
`while actively working to conceal the availability of its free filing product, has allowed Intuit to
`extract, through the use of deceptive, unlawful and unfair acts, practices and conduct, funds
`which should rightfully have been retained by eligible taxpayers.
`6.
`Through this action, Plaintiffs seek equitable relief in the form of an order
`enjoining Intuit from engaging in the practices challenged herein and requiring restitution of all
`funds improperly obtained by Intuit from the taxpayers who make up the proposed class.
`PARTIES
`Plaintiff Andrew Dohrmann is a resident and citizen of California.
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`7.
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`CONSOLIDATED CLASS ACTION COMPLAINT
`CASE NO. 3:19-cv-02546-CRB
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`Case 3:19-cv-02546-CRB Document 80 Filed 09/13/19 Page 4 of 43
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`8.
`Plaintiff Laura Nichols is a resident and citizen of Nebraska.
`9.
`Plaintiff Brianna Sinohui is a resident and citizen of California.
`10.
`Plaintiff Joseph Brougher is a resident and citizen of Pennsylvania.
`11.
`Plaintiff Monica Chandler is a citizen and resident of Florida.
`12.
`Defendant Intuit Inc. is a Delaware corporation with its principal place of
`business in Mountain View, California.
`JURISDICTION AND VENUE
`13.
`This Court has jurisdiction over this lawsuit under the Class Action Fairness Act,
`28 U.S.C. § 1332, because this is a proposed class action in which: (1) there are at least 100
`class members; (2) the combined claims of class members exceed $5,000,000, exclusive of
`interest, attorneys’ fees, and costs; and (3) Intuit and class members are domiciled in different
`states.
`14.
`The Court has personal jurisdiction over Intuit because its principal place of
`business is within this District and it has sufficient minimum contacts in California to render
`the exercise of jurisdiction by this Court proper and necessary.
`15.
`Venue is proper in this District under 28 U.S.C. § 1391(b) because a substantial
`part of the conduct at issue in this case occurred in this District.
`THE CLASS REPRESENTATIVES
`Andrew Dohrmann
`16.
`Plaintiff Andrew Dohrmann is a student and carpenter residing in Moraga,
`California. His adjusted gross income in 2018 was under $20,000. In April 2019, he used
`TurboTax to prepare and file his tax returns for the 2018 tax year.
`17. Mr. Dohrmann searched the internet for free e-filing options and found
`TurboTax’s Free Edition. He began the tax-preparation process on Free Edition believing, as its
`name indicated, that Free Edition was free.
`18.
`After submitting his personal information required to file his taxes—including
`information sufficient to confirm to Intuit that Mr. Dohrmann qualified for the Free File
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`CONSOLIDATED CLASS ACTION COMPLAINT
`CASE NO. 3:19-cv-02546-CRB
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`Case 3:19-cv-02546-CRB Document 80 Filed 09/13/19 Page 5 of 43
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`Program—Mr. Dohrmann received a notification from Intuit stating that he would need to pay a
`fee to complete and file his tax return.
`19.
`Intuit did not notify Mr. Dohrmann that its service was not free until the very end
`of the tax-filing process, after he had entered a significant amount of personal information. Mr.
`Dohrmann paid the fee to complete his filing, to avoid losing the value of the time he had spent
`inputting his information.
`20. Mr. Dohrmann qualified to file his taxes for free using TurboTax Freedom
`Edition and the Free File Program. Had Intuit made its free tax-filing service accessible to him,
`Mr. Dohrmann would have used it, rather than the paid version. But for Intuit’s concealment of
`Freedom Edition, Mr. Dohrmann would not have paid Intuit to file his taxes.
`21.
`Intuit’s conduct, as further described in this complaint, caused Mr. Dohrmann to
`pay approximately $105 to Intuit on April 14, 2019 to file his 2018 federal and state tax returns.
`Laura Nichols
`22.
`Plaintiff Laura Nichols is a current member of the Marine Corps Reserve residing
`in Nebraska. Her adjusted gross income in 2018 was under $30,000. In April 2019, she used
`TurboTax to prepare and file her taxes for the 2018 tax year.
`23. When Ms. Nichols filed her 2018 taxes, she was working for the military full time
`and living on a military base. She searched the internet for free e-filing options and found
`TurboTax’s Free Edition. She began the tax-preparation process on Free Edition believing, as
`its name indicated, that Free Edition was free.
`24. Ms. Nichols spent several hours using TurboTax to prepare her tax returns. As
`part of that process, she provided TurboTax with significant amounts of personal information,
`including information sufficient to notify Intuit that Ms. Nichols qualified for the Free File
`Program. After submitting her personal information, Intuit informed Ms. Nichols that she
`would have to pay a fee to complete and file her tax return through TurboTax.
`25.
`Intuit did not notify Ms. Nichols that its service was not free until the very end of
`the tax filing process, after she had entered a significant amount of personal information. Ms.
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`CONSOLIDATED CLASS ACTION COMPLAINT
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`Nichols paid the fee to complete her filing, to avoid losing the value of the time she had spent
`inputting her information.
`26. Ms. Nichols qualified to file her taxes for free using TurboTax Freedom Edition
`and the Free File Program. Had Intuit made its free tax-filing service accessible to her, Ms.
`Nichols would have used it rather than the paid version. But for Intuit’s concealment of
`Freedom Edition, Ms. Nichols would not have paid Intuit to file her taxes.
`27.
`Intuit’s conduct, as further described in this complaint, caused Ms. Nichols to pay
`approximately $30 to Intuit in April 2019 to file her 2018 federal and state tax returns.
`Brianna Sinohui
`28.
`Plaintiff Brianna Sinohui is a resident of Redlands, California. Her adjusted gross
`income in 2018 was under $10,000. In 2019, she used TurboTax to prepare and file her tax
`returns for the 2018 tax year.
`29. Ms. Sinohui navigated to Intuit’s TurboTax Free Edition website and began the
`tax-preparation process, believing that Free Edition was, as its name indicated, free.
`30.
`After submitting her personal information—including information sufficient to
`confirm to Intuit that Ms. Sinohui qualified for the Free File Program—Ms. Sinohui received a
`notification from Intuit stating that she would need to pay a fee to complete and file her tax
`return.
`31.
`Intuit did not notify Ms. Sinohui that its service was not free until the very end of
`the tax-filing process, after she had entered a significant amount of personal information. Ms.
`Sinohui paid the fee to complete her filing, to avoid losing the value of the time she had spent
`inputting her information.
`32. Ms. Sinohui qualified to file her taxes for free using TurboTax Freedom Edition.
`Had Intuit made its free tax filing service accessible to her, Ms. Sinohui would have used it,
`rather than the paid version. But for Intuit’s concealment of Freedom Edition, Ms. Sinohui
`would not have paid Intuit to file her taxes.
`33.
`Intuit’s conduct, as further described in this complaint, caused Ms. Sinohui pay
`approximately $179 to Intuit to file her 2018 federal and state tax returns.
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`Joseph Brougher
`34.
`Plaintiff Joseph Brougher is a student with a part-time job who resides in West
`Mifflin, Pennsylvania. His adjusted gross income in 2018 was under $10,000. In January 2019,
`he used TurboTax to prepare and file his tax returns for the 2018 tax year.
`35. Mr. Brougher navigated to the TurboTax’s Free Edition and began the tax-
`preparation process based on the understanding that Free Edition was, as its name indicated,
`free.
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`36.
`After submitting his personal information—including information sufficient to
`confirm to Intuit that Mr. Brougher qualified for the Free File Program—Mr. Brougher received
`a notification from Intuit stating that he would need to pay a fee to complete and file his tax
`return.
`37.
`Intuit did not notify Mr. Brougher that is service was not free until the very end of
`the tax-filing process, after he had entered a significant amount of personal information. Mr.
`Brougher paid the fee to complete his filing, to avoid losing the value of the time he had spent
`inputting his information.
`38. Mr. Brougher qualified to file his taxes for free using TurboTax Freedom Edition.
`Had Intuit made its free tax filing service accessible to him, Mr. Brougher would have used it,
`rather than the paid version. But for Intuit’s concealment of Freedom Edition, Mr. Brougher
`would not have paid Intuit to file his taxes.
`39.
`Intuit’s conduct, as further described in this complaint, caused Mr. Brougher to
`pay approximately $85.58 to Intuit to file his 2018 federal and state tax returns.
`Monica Chandler
`40.
`Plaintiff Monica Chandler works in public services and resides in Lakeland,
`Florida. Her adjusted gross income in 2018 was under $25,000. In March 2019, she used
`TurboTax to prepare and file her tax returns for the 2018 tax year.
`41. Ms. Chandler used an accounting service to complete her taxes the previous year,
`but decided to use the TurboTax Free Edition for the 2019 tax season so that she could file her
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`tax returns for free. She navigated to the Free Edition and began the tax-preparation process
`believing that Free Edition was, as its name indicated, free.
`42.
`After submitting her personal information—including information sufficient to
`confirm to Intuit that Ms. Chandler qualified for the Free File Program—Ms. Chandler received
`a notification from Intuit stating that she would need to pay a fee to complete and file her tax
`return.
`43.
`Intuit did not notify Ms. Chandler that its service was not free until the very end
`of the tax filing process, after she had entered a significant amount of personal information.
`Ms. Chandler paid the fee to finish her filing, to avoid losing the value of the time she had spent
`inputting her information.
`44. Ms. Chandler qualified to file her taxes for free using TurboTax Freedom Edition.
`Had Intuit made its free tax filing service accessible to her, Ms. Chandler would have used it,
`rather than the paid version. But for Intuit’s concealment of Freedom Edition, Ms. Chandler
`would not have paid Intuit to file her taxes.
`45.
`Intuit’s conduct, as further described in this complaint, caused Ms. Chandler to
`pay approximately $64.98 to Intuit to file her 2018 federal and state tax returns.
`COMMON FACTUAL ALLEGATIONS
`A.
`The Free File Program
`46.
`Congress passed the Internal Revenue Service Restructuring and Reform Act of
`1998 (the “Act”) to restructure, modernize, and improve taxpayer protections and rights. A
`central feature of the Act was its command to modernize computer systems and business
`processes to offer expanded electronic tax filing. The Act set a goal of 80 percent of all tax
`returns being filed electronically by 2007.
`47.
`In November 2001, the Office of Management and Budget’s Quicksilver Task
`Force established the EZ Tax Filing Initiative, which directed the IRS to “create a single point
`of access to free on-line preparation and electronic tax filing services provided by Industry
`Partners to reduce burden and costs to taxpayers.” See Presential Initiatives: IRS Free File,
`https://georgewbush-whitehouse.archives.gov/omb/egov/c-1-3-IRS.html. Initially, the
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`administration proposed that the IRS develop its own digital filing form, which would be
`accessible through the whitehouse.gov website. Ultimately, however, the IRS entered into an
`agreement with a consortium of private tax preparation companies, originally known as the
`Free File Alliance, LLC and now called Free File, Inc. (the “Alliance”), to facilitate the
`expansion of free electronic tax filing.
`48.
`In 2002, the IRS entered into an agreement with the Alliance called the Free File
`Agreement (the “Agreement”). Under the Agreement, members of the Alliance committed to
`provide free tax preparation and electronic filing services to at least 60% of United States
`taxpayers.
`49.
`Intuit—developer of the TurboTax tax preparation and filing software—is the
`market leader in consumer tax software and has largest market share of any member of the
`Alliance. The other current members of the Alliance are H&R Block, 1040NOW Corp., Drake
`Enterprises, ezTaxReturn.com, FileYourTaxes, Free Tax Returns, Liberty Tax, OnLine Taxes,
`TaxACT, TaxHawk, and TaxSlayer.
`50.
`The IRS and the Alliance extended the Agreement in 2005 and expanded the
`Program to include “taxpayers with an AGI equal to or less than 70% of all US taxpayers or
`below for the prior year, including those least able to afford efiling tax returns, based upon
`verifiable characteristics in their tax return[.]” The criteria for eligibility for free tax
`preparation and filing services have remained substantially the same since 2005. The
`Agreement has been renewed several times and has been amended through a series of
`memoranda of understanding (“MOUs”). On October 31, 2018, the IRS and Alliance entered
`into an Eighth MOU renewing the Free File Program through October 31, 2021.
`51.
`Pursuant to the Agreement, each Alliance member serves a share of eligible
`taxpayers based on specific objective criteria, so that all qualifying taxpayers have access to at
`least one online platform that will allow them to file their returns at no cost. Intuit is
`responsible for providing free e-filing to some of the lowest-earning, and most vulnerable,
`taxpayers: those who have AGI of $34,000 or less, are eligible for the Earned Income Tax
`Credit, or are active military members with AGI of $66,000 or less. Under the Agreement,
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`these are the only requirements taxpayers must meet to file for free through TurboTax under
`the Free File Program.
`52.
`The Agreement’s stated purpose is to “extend[] the benefits of online federal tax
`preparation and electronic filing to economically disadvantaged and underserved populations at
`no cost to either the individual user or to the public treasury.” The Agreement states that “to
`serve the greater good . . . the scope of this program is focused on covering the taxpayers least
`able to afford e-filing their returns on their own.”
`B.
`Intuit Entered Into the Free File Agreement to Avert the Competitive
`Threat Posed by the Federal Government
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`53.
`According to the Treasury Inspector General for Tax Administration, the
`Alliance’s “primary goal is to keep the Federal Government from entering the tax preparation
`business.” See Written Statement of Treasury Inspector General for Tax Administration J.
`Russell George Before the U.S. House of Representatives Committee on Ways and Means (Apr.
`6, 2006) (available at https://www.treasury.gov/tigta/congress/congress_04062006.htm) (last
`visited Sept. 13, 2019).
`54.
`The Agreement includes a noncompete provision that prohibits the IRS from
`creating its own free e-filing system. In contrast, many countries offer their citizens the option
`to file free online tax returns directly with the government.
`55.
`Intuit and other Alliance members have spent millions lobbying to make the Free
`File Program permanent in order to preserve the benefits of this noncompete provision.
`56.
`In its SEC filings, Intuit has acknowledged the competitive threat of a
`government-run free e-filing system: “We also face potential competitive challenges from
`publicly funded government entities that offer electronic tax preparation and filing services at
`no cost to individual taxpayers.” Intuit’s participation in the Alliance “has kept the federal
`government from being a direct competitor to Intuit’s tax offerings.”
`57.
`In its 2004 Annual Report, Intuit acknowledged: “were the federal government to
`terminate the Free File Alliance and elect to provide its own software and electronic filing
`services available to taxpayers at no charge it would negatively impact our revenue and
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` profits.”
`58.
`Thus, by entering into the Agreement with the IRS, Intuit avoided competition
`from government-provided free tax programs. As a result, Intuit ensured that millions of
`taxpayers would visit its websites in search of e-filing options, nearly all of which are fee-
`based. As of 2017, Intuit had a 65% market share in the do-it-yourself tax software category.
`C.
`Intuit Steers Taxpayers Away from Free File to Its Commercial Sites
`59.
`Although the stated purpose of the Agreement is to allow free tax filing for those
`taxpayers who are least able to afford e-filing, Intuit devised a scheme to steer customers away
`from participation in the Free File Program and drive revenue from Free File eligible taxpayers
`to Intuit’s fee-based software products. For example, Intuit offers two similarly-named
`products that perform the same core functions: (1) a free tax preparation software product it
`named “TurboTax Freedom Edition”—which enables eligible users to complete and e-file their
`tax returns for free pursuant to the Free File Program; and (2) a separate commercial tax
`preparation software product it named “TurboTax Free Edition”—which is heavily marketed
`and promoted as free, but actually charges customers to file all but the most basic of tax returns
`including returns that are eligible for free filing under the Free File Program.
`60.
`Thus, while the trade names given by Intuit to its Free File and paid software
`products are almost identical, the products are distinct in material, unfair and misleading ways.
`Freedom Edition, the actually free software product Intuit offers pursuant to the Free File
`Program, is intended for taxpayers with an adjusted gross income of $34,000 or less, those who
`are eligible for the Earned Income Tax Credit, as well as those on active military duty with an
`adjusted gross income of $66,000 or less. These taxpayers are eligible under the Free File
`Program to prepare and file a return for free using TurboTax Freedom Edition, a full-featured
`tax filing software system that allows a taxpayer to prepare and file a federal tax return for free.
`In addition to the Form 1040, Freedom Edition provides free access to over 100 other tax forms
`as required under the Free File Program, including Schedules 1 through 6, 1099-MISC, and
`1040 Schedules A-E, EIC, F, H, and J. This means that, as required under the Free File
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`Program, even taxpayers with complex returns can use Freedom Edition to e-file for free if
`they are able to access it and meet the basic eligibility requirements described above.
`61.
`The Free Edition, by contrast, is only free for “simple tax returns that can be
`filed on Form 1040 without any attached schedules.” The addition of any forms, including in
`returns requiring itemized deductions, credits, or incomes reportable on Schedules 1 to 6,
`cannot be prepared for free using TurboTax Free Edition. Consequently, taxpayers who meet
`any of the following criteria, among others, will be charged when using the Free Edition: they
`are self-employed, do not have health insurance, receive unemployment pay, live in one state
`but work in another, pay or receive alimony, have business income, expenses, or losses, have
`capital gains or losses, have income from rental real estate, receive royalties, have farm income
`or losses, claim a student loan deduction, claim a health savings account contribution
`deduction, claim deductible educator expenses, claim education credits, claim retirement
`savings contribution credits, or claim credit for child and dependent care expenses. None of
`these criteria impact a taxpayer’s eligibility to file for free under the Free File Program.
`62.
`Even where a taxpayer using the Free Edition has provided sufficient
`information to allow Intuit to determine that the taxpayer qualifies for free filing under the Free
`File Program, Intuit does not notify the taxpayer of their eligibility under the Program or direct
`the taxpayer to the Freedom Edition website where the filing would actually be free. Thus,
`even though a taxpayer is eligible to file for free under the Free File Program and has been
`directed by Intuit to a purportedly “Free Edition” of its product, Intuit nonetheless charges that
`taxpayer a fee to complete the e-filing of his or her return.
`63.
`Instead of offering an eligible taxpayer the option to file for free under the Free
`File Program, when such a taxpayer seeks to file for free using the “Free Edition” but triggers
`one of the conditions set by Intuit precluding them from doing so, Intuit claims there is a need
`to “upgrade” to one of TurboTax’s paid products (1) “Deluxe” ($59.99 and up); (2) “Premier”
`($79.99 and up); or (3) “Self-Employed” ($119.99 and up). Taxpayers typically spend
`considerable time inputting their personal and wage information using the Free Edition before
`Intuit informs them that an “upgrade” is necessary to file their returns.
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`64.
`Thus, the Free Edition requires users to “upgrade” (i.e., pay a fee) even when
`they otherwise qualify under the Free File Program and could submit the exact same forms
`using the Freedom Edition at no cost. For example, the above graphic lists 1099 tax forms as
`requiring an upgrade to a paid product, even where the IRS website lists these same forms as
`qualifying for free filing under the Free File Program and they could be filed for free through
`Intuit’s Freedom Edition website by taxpayers able to access it.
`65.
`Intuit further represents to taxpayers using the Free Edition that an upgrade is
`required to “accurately” file their tax return:
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`66.
`Intuit’s statement in this regard is both contrary to Intuit’s advertising and
`literally false. “[U]pgrading” has nothing to do with “accurately” filing—taxpayers can
`accurately file the same tax return for free using other free alternatives—including using the
`Freedom Edition created for the Free File Program.
`67. While duping taxpayers into paying for filings Intuit knew could be filed for free,
`Intuit went to great lengths to conceal the existence of the Freedom Edition and direct
`taxpayers towards its Free Edition. As reported by ProPublica, a former Intuit employee
`recalled a May 2017 marketing team meeting at Intuit’s Headquarters at which a new
`employee proposed that customers who go through TurboTax’s filing process and input
`information demonstrating their eligibility for free filing receive a “hard recommendation” and
`be routed to the truly free product. This suggestion was reportedly met with laughter, and then
`other meeting attendees quickly changed the subject. The same former employee explained
`that Intuit has “ways of detecting if you’re paying too much, but they just don’t do it.”
`68.
`In earnings calls, Intuit openly boasted of the success of its “free-to-fee” or “free-
`to-pay” business model in steering customers to pay for e-filing unnecessarily. For example:
`a.
`In a 2008 earnings call, then-CEO Brad Smith explained that Intuit has
`“2.5 years of experience of learning what free is about and how best to monetize free.” He
`added, “We feel good with the model. We have a pretty good handle for how to get customers
`who use free to come into the franchise and actually buy additional products and services . . . .”
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`CASE NO. 3:19-cv-02546-CRB
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`b.
`In a 2015 earnings call, Brad Smith further explained, “I think our track
`record is we can bring people in on free. We can monetize many of them in the same season.
`But we also tend to monetize more of them the following season and that just continues to be a
`formula that pays off.”
`69.
`Intuit’s strategy to suppress free filing has been wildly successful. In 2018, more
`than 100 million taxpayers were eligible to file for free under the Free File Program, but only
`about 2.5 million did so—far short of the Free File Program’s intended goal of making free e-
`filing available to at least 70% of filers. Moreover, while one might reasonably expect the
`number of e-filers using websites to increase in light of the significant increase in the number
`of filers, the growth of the internet and, more recently, changes to the tax code, the number has
`steadily declined from its peak in 2005, when over 5 million taxpayers filed through the Free
`File Program.
`70.
`In November 2018, the IRS Advisory Council wrote that one explanation for the
`decline in participation involve “[Alliance] members directly marketing their non-Free File
`products to taxpayers who used their Free File product in prior years.” See Internal Revenue
`Service Advisory Council, Public