By Rachel Ochman
Jackson Hewitt and H&R Block are taking their rivalry to the courtroom. The No. 2 tax preparer filed a suit against its much-larger rival, alleging H&R Block is disseminating false and deceptive advertising. Jackson Hewitt also seeks an injunction barring H&R Block from continuing to run the ads, according to the complaint.
The issue: Oh, just an ad claiming that two-out-of-three Jackson Hewitt customers who’ve had their returns looked over by H&R Block were entitled to bigger refunds, if only their Jackson Hewitt preparer had been more careful or competent.
“We intend to pursue every avenue available to us to stop their campaign of misinformation,” says Jackson Hewitt chief executive Philip Sanford.
As tax season kicks off, tax preparers have started armoring themselves for turf wars over a dwindling number of customers. Tax software has made online filing much more user-friendly, and the weak economy left many taxpayers feeling like they don’t necessarily need to shell out the cash for a professional. Both Jackson Hewitt and H&R Block have seen revenues take a thrashing in recent quarters.
Jackson Hewitt hopes to sweep up some of the crumbs by offering a product H&R Block can’t: refund-anticipation loans. RALs give customers the option to pay a sizeable fee to get on-the-spot refunds of up to $1,500. As The Tax Blog previously reported, regulators recently barred H&R Block’s bank from backing the highly controversial loans, whereas the FDIC, which governs the bank backing Jackson Hewitt’s loans, hasn’t made the same determination. So, Hewitt gets a green light on RALs for now.
H&R Block tried to make up lost ground, the complaint alleges, with a print and broadcast marketing campaign “that incorporates several literally false, misleading, and highly disparaging” claims. Some of the ads in question stem from H&R Block’s “Second Look Review” service. For a $29 fee, H&R Block will look over past returns prepared by other companies to establish grounds for getting you a bigger return. H&R Block boasts it found more money for two-thirds of its Second Look customers who had errors in their tax returns, according to data from 2010 reviews.
Last week, H&R Block released ads asserting their review found two-out-of-three Hewitt customers got skimpier returns than owed due to errors or incompetence. Some versions of the ad spout out dollar amounts H&R Block preparers were able to get their customers: “We found him an additional $431,” and “We found her an additional $2,158.”
Not only does Jackson Hewitt challenge the merit of these findings, the company also argues that the ads inflate customers’ refund expectations by touting atypical results.
Jackson Hewitt argues the ads are driving clients away and battering the company’s reputation. The tax preparer seeks preliminary and permanent injunctions preventing H&R Block from running the ads, as well as damages, costs and attorneys’ fees.
H&R Block defends its ads, and says the suit was filed “without any requests for substantiation.”
Readers, do you think Jackson Hewitt has grounds to haul H&R Block to court? Or does H&R Block have the right to exploit what its review has determined to be a competitor’s spotty record?