United States: Tax Geeks Lob Lanham Act At Rival Over Pricing Claims

Newcomer company known as Happy Tax takes on H&R Block for swiping keywords

Agony

From January until April 15, taxpayers are concerned with filing their taxes and seeking help from professional companies to guarantee the most efficient and legally compliant tax filings. Importantly, the companies that assist taxpayers with filing their taxes must tread carefully in securing their clients the lowest amount of tax while balancing a potential audit or further IRS inquiry. Recently, a newcomer tax preparation company known as Happy Tax filed a Lanham Act lawsuit against H&R Block.

Tax Revolution

Happy Tax, a Florida-based company, is positioning itself as a disrupter within the tax preparation industry: “Welcome to the tax preparation revolution!” its website announces. “Shaking up the $19 billion tax preparation industry, Happy Tax’s disruptive model was born out of frustration with unreliable, underqualified tax preparers with no licensing or certification and as little as five days of tax training,” claims a press release.

Instead of hiring representatives to sit in storefronts, Happy Tax offers a mobile platform to connect consumers with its franchisees, who are “serious tax code geeks:" licensed and certified CPAs. And the formula seems to be working; the company has contracted with more than 160 franchisees in 32 states.

Happy Tax’s complaint against H&R Block was originally filed in New York Supreme Court on January 15 and was promptly removed to the state’s Southern District. Happy Tax is accusing H&R Block of claiming that it is the only service that offers “transparent” and “upfront” pricing to its clients, while claims of transparency and upfront pricing have been prominently used in Happy Tax’s advertising for services since 2015.

H&R Block is accused of false and misleading advertising that is damaging Happy Tax’s profile and eroding the goodwill that Happy Tax has built up nationwide.

The Takeaway

Happy Tax says that it informed H&R Block that it had already rolled out the “transparent” and “upfront” terminology, but its rival has refused to pull down the offending advertising. Happy Tax alleges that H&R Block told its representatives that there was no conflict between the campaigns because “Happy Tax’s services are virtual or online,” as opposed to its own in-person services.

Happy Tax counters that the offending commercial (and other material) “specifically references that it applies to ONLINE [services] in print and targets customers of both in-person and online tax preparation services.”

It will be interesting to see whether this distinction between in-person and online or virtual service is enough to discount Happy Tax’s allegations. It is also worth noting that Happy Tax makes an additional claim in its complaint: H&R Block’s advertising is also “false because it was Happy Tax, and not H&R Block, that innovated the concept of ‘Upfront’ and ‘Transparent’ pricing in connection with tax preparation service” – a more general assertion that relies on an interpretation of industry history, rather than false claims of exclusivity. As the market for online and virtual services replaces in-person services typically offered by industry leaders, it will be interesting to see how the courts grapple with these claims of misleading advertising and damage to goodwill of competitors for the same services provided in different mediums.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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