The Federal Trade Commission (FTC) has initiated a lawsuit against Adobe and two of its executives for allegedly engaging in deceptive practices regarding software subscription cancellations and undisclosed early termination fees.
FTC’s Allegations
On Monday, the FTC accused Adobe of misleading customers by hiding early termination fees for popular tools such as Acrobat, Photoshop, and Illustrator. The complaint highlights several key issues:
Deceptive Enrollment Practices: Adobe promoted its “annual, paid monthly” plan without clearly disclosing that canceling early could incur fees amounting to hundreds of dollars.
Obstacles to Cancellation: Many users attempting to cancel faced numerous hurdles, including continued charges despite believing they had successfully canceled.
Details from the Complaint
According to the FTC, Adobe calculates early termination fees as 50% of the remaining payments if customers cancel within the first year. The complaint also notes Adobe’s substantial revenue growth from subscription services, increasing from $7.7 billion in 2019 to $14.2 billion in 2023.
The lawsuit identifies two Adobe executives, Maninder Sawhney (Vice President) and David Wadhwani (President of Digital Media), as defendants.
The FTC claims Adobe’s practices violate the Restore Online Shoppers’ Confidence Act by not prominently disclosing cancellation fees, failing to obtain informed consent, and complicating the cancellation process.
This lawsuit aligns with the FTC’s 2023 proposal for a “click to cancel” rule, aiming to simplify subscription cancellations.
Consumer Complaints
Samuel Levine, Director of the FTC’s Consumer Protection Bureau, stated, “Adobe trapped customers into year-long subscriptions through hidden early termination fees and numerous cancellation hurdles.”
He emphasized that consumers are frustrated with such deceptive practices and the roadblocks they face when trying to cancel.
The FTC’s complaint further alleges that Adobe’s website cancellation process forces users through numerous steps and that customer service interactions often involve resistance, delays, dropped calls, and multiple transfers.
Some customers continued to be charged even after attempting to cancel, only discovering the charges upon reviewing their financial statements. Consumers have voiced their frustrations on social media and with the Better Business Bureau, leading to the FTC’s legal action.
Adobe’s Response
Adobe intends to challenge the FTC’s allegations in court. Dana Rao, Adobe’s General Counsel, defended the company’s practices, stating, “Subscription services are convenient, flexible, and cost-effective. We are transparent with our terms and conditions and have a simple cancellation process.”
The case centers on Adobe’s Creative Cloud, a suite of programs for photo and video editing, web development, and graphic design. Before 2012, Adobe sold its software under a user license model, allowing indefinite use after a one-time payment.
Currently, Adobe’s Creative Cloud offers different subscription plans:
- Monthly: $89.99/month
- Annual Paid Monthly: $59.99/month
- Annual Prepaid: $54.99/month
Prices vary for group subscriptions, students, and educators.
Legal Proceedings
The FTC’s unanimous decision (3-0) to refer the complaint to the Department of Justice (DOJ) led to its filing in the U.S. District Court for the Northern District of California.
The FTC seeks refunds for consumers who paid cancellation fees and monetary penalties. The court will decide the outcome of this case.