US gov sues Adobe for hiding fees, preventing easy cancellation

The US Federal Trade Commission (FTC) filed suit against Adobe on Monday, accusing the creative software application company of deceiving consumers with hidden fees and an elusive cancellation process.

The San Jose-based firm is alleged to have pushed consumers to buy their “annual paid monthly” subscription without letting customers know that if the plan was canceled in the first 12 months, it could cost them hundreds of dollars in early termination fees (ETF).

The consumer watchdog agency also said the process to cancel a subscription on the Adobe website was convoluted at best and would force customers “to navigate numerous pages” and encounter “dropped calls and chats, and multiple transfers from Adobe representatives.”

Furthermore, the US Department of Justice-led lawsuit claims Adobe has been engaging in deceptive marketing practices for years – even after it became aware of the consumer complaints to the US Better Business Bureau.

FTC takes action against Adobe and executives for hiding fees, preventing consumers from easily cancelling software subscriptions: https://t.co/tJ7J3tLxc4 /1

undefined FTC (@FTC) June 17, 2024

Adobe 'trapped customers'

As one of the world’s largest software companies, Adobe has more than 20 popular design and productivity software applications in its stable, including Acrobat, Photoshop, Illustrator, InDesign, and more.

Adobe offers subscription plans to these and dozens of other products and services on its website, the lawsuit states.

Prices run from as low as $4.99 per month for credits to its basic generative AI model FireFly to a $59.99 per month subscription to the entire Adobe Creative Cloud suite, the company’s website shows.

The ETFs – said to equal 50 percent of a subscription's remaining monthly payments for the year – would either be buried in small and difficult-to-find print on the website or only available when hovering over small icons, the FTC said.

“Adobe trapped customers into year-long subscriptions through hidden early termination fees and numerous cancellation hurdles,” said Samuel Levine, Director of the FTC’s Bureau of Consumer Protection. “Americans are tired of companies hiding the ball during subscription signup and then putting up roadblocks when they try to cancel. The FTC will continue working to protect Americans from these illegal business practices,” Levine said.

Besides the software maker, the lawsuit names two executives as defendants in the case, Adobe Vice President Maninder Sawhney and President of Adobe’s digital media business David Wadhwani.

Adobe vows to fight accusations

Adobe's general counsel Dana Rao responded to the FTC filing stating the company would dispute the allegations in court.

"Subscription services are convenient, flexible, and cost-effective to allow users to choose the plan that best fits their needs, timeline, and budget. We are transparent with the terms and conditions of our subscription agreements and have a simple cancellation process," Rao said.

Subscription revenue comprised 95% of Adobe's total revenue in the quarter ending March 1, amounting to $4.92 billion out of $5.18 billion.

Adobe is accused of violating the Restore Online Shoppers’ Confidence Act, which bars online merchants from charging automatic subscription renewals and EFTs unless they are properly disclosed and consented to by the consumer.

The suit, filed in California's Northern District federal court, seeks civil penalties, an injunction against further wrongdoing, and other remedies.

Last June, the FTC filed a similar case against Amazon accusing the online shopping giant of scamming American consumers into signing up for a yearly Prime membership and then making them traverse through a maze of web pages if they tried to cancel it.

In May of this year, a judge denied Amazon’s attempt to try and get the case dismissed, and the case has now been scheduled for a 10-day non-jury trial next February.

Adobe also made headlines earlier this month, angering its Adobe Creative Cloud users over vague language in the firm’s new terms and conditions that appear to give the company the right to access creators’ content.

Adobe announced it would be releasing a new version of its terms and conditions on June 18th in an attempt to appease its customer base.