2024-26695. H&R Block; Analysis of Proposed Consent Order To Aid Public Comment

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Federal Trade Commission

1. [Docket No. 9427]

AGENCY:

Federal Trade Commission.

ACTION:

Proposed consent agreement; request for comment.

SUMMARY:

The consent agreement in this matter settles alleged violations of Federal law prohibiting unfair or deceptive acts or practices. The attached Analysis of Proposed Consent Order to Aid Public Comment describes both the allegations in the complaint and the terms of the consent order—embodied in the consent agreement—that would settle these allegations.

DATES:

Comments must be received on or before December 16, 2024.

ADDRESSES:

Interested parties may file comments online or on paper by following the instructions in the SUPPLEMENTARY INFORMATION section below. Please write “H&R Block; Docket No. 9427” on your comment and file your comment online at https://www.regulations.gov by following the instructions on the web-based form. If you prefer to file your comment on paper, please mail your comment to the following address: Federal Trade Commission, Office of the Secretary, 600 Pennsylvania Avenue NW, Mail Stop H-144 (Annex T), Washington, DC 20580.

FOR FURTHER INFORMATION CONTACT:

Claire Wack (202-326-2836), Attorney, Division of Marketing Practices, Bureau of Consumer Protection, Federal Trade Commission, 600 Pennsylvania Avenue NW, Washington, DC 20580.

SUPPLEMENTARY INFORMATION:

Pursuant to section 6(f) of the Federal Trade Commission Act, 15 U.S.C. 46(f), and FTC Rule § 2.34, 16 CFR 2.34, notice is hereby given that the above-captioned consent agreement containing a consent order to cease and desist, having been filed with and accepted, subject to final approval, by the Commission, has been placed on the public record for a period of 30 days. The following Analysis to Aid Public Comment describes the terms of the consent agreement and the allegations in the complaint. An electronic copy of the full text of the consent agreement package can be obtained at https://www.ftc.gov/​news-events/​commission-actions.

You can file a comment online or on paper. For the Commission to consider your comment, we must receive it on or before December 16, 2024. Write “H&R Block; Docket No. 9427” on your comment. Your comment—including your name and your State—will be placed on the public record of this proceeding, including, to the extent practicable, on the https://www.regulations.gov website.

Because of heightened security screening, postal mail addressed to the Commission will be subject to delay. We strongly encourage you to submit your comments online through the https://www.regulations.gov website. If you prefer to file your comment on paper, write “H&R Block; Docket No. 9427” on your comment and on the envelope, and mail your comment to the following address: Federal Trade Commission, Office of the Secretary, 600 Pennsylvania Avenue NW, Mail Stop H-144 (Annex T), Washington, DC 20580.

Because your comment will be placed on the publicly accessible website at https://www.regulations.gov, you are solely responsible for making sure your comment does not include any sensitive or confidential information. In particular, your comment should not include sensitive personal information, such as your or anyone else's Social Security number; date of birth; driver's license number or other State identification number, or foreign country equivalent; passport number; financial account number; or credit or debit card number. You are also solely responsible for making sure your comment does not include sensitive health information, such as medical records or other individually identifiable health information. In addition, your comment should not include any “trade secret or any commercial or financial information which . . . is privileged or confidential”—as provided by section 6(f) of the FTC Act, 15 U.S.C. 46(f), and FTC Rule § 4.10(a)(2), 16 CFR 4.10(a)(2)—including competitively sensitive information such as costs, sales statistics, inventories, formulas, patterns, devices, manufacturing processes, or customer names.

Comments containing material for which confidential treatment is requested must be filed in paper form, must be clearly labeled “Confidential,” and must comply with FTC Rule § 4.9(c). In particular, the written request for confidential treatment that accompanies the comment must include the factual and legal basis for the request and must identify the specific portions of the comment to be withheld from the public record. See FTC Rule § 4.9(c). Your comment will be kept confidential only if the General Counsel grants your request in accordance with the law and the public interest. Once your comment has been posted on the https://www.regulations.gov website—as legally required by FTC Rule § 4.9(b)—we cannot redact or remove your comment from that website, unless you submit a confidentiality request that meets the requirements for such treatment under FTC Rule § 4.9(c), and the General Counsel grants that request.

Visit the FTC website at https://www.ftc.gov to read this document and the news release describing the proposed settlement. The FTC Act and other laws the Commission administers permit the collection of public comments to consider and use in this proceeding, as appropriate. The Commission will consider all timely and responsive public comments it receives on or before December 16, 2024. For information on the Commission's privacy policy, including routine uses permitted by the Privacy Act, see https://www.ftc.gov/​site-information/​privacy-policy.

Analysis of Proposed Consent Order To Aid Public Comment

The Federal Trade Commission (“Commission”) has accepted, subject to final approval, a proposed stipulated Decision and Order (“Proposed Order”) to resolve In the Matter of H&R Block Inc., HRB Digital LLC, and HRB Tax Group, Inc. (collectively, “Respondents”). The Proposed Order ( print page 90291) has been placed on the public record for 30 days for receipt of comments from interested persons. Comments received during this period will become part of the public record. After 30 days, the Commission will again review the agreement, along with any comments received, and will decide whether it should withdraw from the agreement and take appropriate action or make final the Proposed Order.

This matter involves Respondents' advertising and design of their online tax preparation products (“Online Products”). According to the Commission's complaint, Respondents deceptively market their Online Products by representing to consumers that they can file for free using H&R Block. In addition, the Complaint alleges that Respondents designed their Online Products to encumber consumers attempting to downgrade from a more expensive Online Product to a less expensive or free product, through two unfair practices: (1) requiring consumers wishing to downgrade to first contact customer service to request and complete the downgrade (“customer service contact requirement”), and (2) upon downgrading, deleting all information the consumer has entered (“deletion requirement”). Based on the foregoing, the Commission alleges that Respondents have engaged in, and are engaging in, unfair and deceptive business practices in the advertising, marketing, distribution, and sale of their Online Products, in violation of section 5 of the FTC Act, 15 U.S.C. 45.

The Proposed Order contains injunctive provisions addressing the violations alleged in the Complaint and $7 million to redress consumers harmed by Respondents' unlawful practices. Section I provides for notice to consumers and staggered elimination of the customer service contact and deletion requirements, with full elimination of these requirements mandated by January 15, 2026. Section I.A. requires Respondents to notify upgrading consumers by January 15, 2025, that, if they later choose to downgrade, their information will not be saved and they will have to start over. This provision will be in place until the deletion requirements are eliminated, January 15, 2026. Section I.B. sets forth the consumer notice that Respondents must give at the point of upgrade, starting January 15, 2026, to describe the new downgrading practices. Section I.C. requires that Respondents allow downgrades to the same extent they permit upgrades. Section I.D. requires Respondents to update their in-product chatbot assistant to permit downgrades without requiring the participation of a live agent by February 15, 2025. Section I.E. of the Proposed Order requires Respondents to provide another automated means to downgrade that is easily noticeable and persistently available to the consumer within the Online Products by January 15, 2026. Section I.F. prohibits requiring the participation of a live agent to effectuate a downgrade by February 15, 2025. Section I.G. requires that Respondents provide to consumers by January 15, 2025, clear and easily noticeable instructions on how to downgrade. Section I.H. sets forth required changes to the deletion requirement that Respondents must implement by January 15, 2026.

Section II prohibits Respondents from representing that their Online Products are free unless such products are actually free to all consumers, or Respondents clearly and conspicuously disclose the percentage of taxpayers that qualify for the offer. Alternatively, Respondents may disclose that the offer is not free for a majority of taxpayers. Section III prohibits Respondents generally from misrepresenting any material fact concerning the Online Products. Section IV includes $7 million to redress consumers who were harmed by Respondents' illegal practices.

Section V contains ancillary provisions necessary to effectuate Respondents' payment of the redress amount, while Section VI requires Respondents to provide customer information needed for the administration of consumer redress. Section VII requires Respondents, along with certain employees and successors, to acknowledge receipt of the Proposed Order.

Sections VIII through X of the Proposed Order are reporting and compliance provisions, which include recordkeeping requirements and provisions requiring Respondents to provide information or documents necessary for the Commission to monitor compliance with the Proposed Order. Section XI states that the Proposed Order will remain in effect for twenty (20) years, with certain exceptions.

The purpose of this analysis is to aid public comment on the Proposed Order. It is not intended to constitute an official interpretation of the Complaint or Proposed Order, or to modify in any way the Proposed Order's terms.

By direction of the Commission.

April J. Tabor,

Secretary.

Concurring Statement of Commissioner Andrew N. Ferguson

Today, the Commission votes to accept for public comment the stipulated Decision and Order in In re H&R Block Inc., HRB Digital LLC, and HRB Tax Group, Inc (collectively, “H&R Block”). H&R Block offers tax preparation and filing services to assist consumers in filing their taxes. The complaint accuses H&R Block of engaging in unfair and deceptive business practices relating to its customer-service-contact requirements, data-wiping practices, and marketing practices.^[1]

The Commission alleges that H&R Block designed its online products to increase the burden on consumers who wanted to downgrade from a more expensive version of its tax-preparation product to a less expensive version.^[2] H&R Block allegedly required consumers to contact its customer service department either by phone or online chat to downgrade their products. H&R Block also allegedly deleted all the information a consumer previously entered if the consumer decided to downgrade to a less expensive product.^[3] Finally, the complaint alleges that H&R Block misleadingly marketed a free version of its online tax preparation product while knowing that very few consumers were eligible to use the free version.^[4]

I concur in the Commission's order accepting for public comment the stipulated Decision and Order against H&R Block. But I have serious reservations about the merits of Count III—the deceptive marketing of H&R Block's free version of its online tax preparation products. The U.S. Court of Appeals for the Fifth Circuit is currently reviewing a very similar claim in a different case.^[5] The Fifth Circuit is also considering the constitutionality of dual-layer removal protections for the Commission's Administrative Law Judges, a question presented in this case that has divided the Commission.^[6] I ( print page 90292) withhold my final judgment on the lawfulness of the stipulated Decision and Order until I have reviewed public comments and the Fifth Circuit's decision, if it issues in time.

Footnotes

1.   In re H&R Block Inc., HRB Digital LLC, and HRB Tax Group, No. 9427, Complaint at ¶¶ 56-62.

2.   Id. at ¶ 7.

3.   Ibid.

4.   Id. at ¶¶ 60-61.

5.  Petition for Review, Intuit v. FTC, No. 24-60040 (5th Cir. Jan. 24, 2024), ECF No. 1; Br. for Pet'r at 34-54, Intuit v. FTC, No. 24-600040 (5th Cir. Apr. 15, 2024), ECF No. 56.

6.  See Br. for Pet'r at 27-30, Intuit v. FTC, No. 24-60040 (5th Cir. Apr. 15, 2024), ECF No. 56; compare Order Denying Resp'ts' Mot. To Disqualify the Admin. Law Judge, In the Matter of H&R Block Inc., et al., FTC Docket No. 9427 (Oct. 18, 2024) and Statement of Chair Lina M. Khan, Joined by Comm'r Alvaro Bedoya, Concurring in the Denial of the Motion, In the Matter of H&R Block, Inc., et al., FTC Docket No. 9427 (Oct. 18, 2024), with Statement of Comm'r Andrew N. Ferguson, In the Matter of H&R Block, Inc., et al., Dissenting in Part and Concurring in the Denial of the Motion, FTC Docket No. 9427 (Oct. 18, 2024).