The United States government is taking Adobe, the maker of Photoshop and Acrobat, to the court, alleging that the San Jose-based software company was harming consumers by concealing hefty termination fees in its most popular subscription plan, making it difficult to cancel subscriptions.
Along with Adobe, the Federal Trade Commission (FTC) also named two of its leading executives, Maninder Sawhney and David Wadhwani, for deceiving consumers.
Wadhwani is the company’s President of Digital Media Business, and Sawhney is Vice-President of Digital Go to Market & Sales. Adobe is headed by Indian American CEO, Shantanu Narayen.
On Friday, Adobe posted better-than-expected results for the quarter ending May, reporting revenue of $5.31 billion, a 10 per cent growth year-on-year.
In 2023, subscriptions accounted for $14.22 billion of Adobe’s annual revenue of $19.41 billion in total annual revenue.
In the court complaint filed by the Department of Justice, FTC accused Adobe pushed consumers toward the “annual paid monthly” subscription without adequately disclosing that cancelling the plan in the first year could cost hundreds of dollars.
Samuel Levine, Director of the FTC’s Bureau of Consumer Protection, said: “Adobe trapped customers into year-long subscriptions through hidden early termination fees and numerous cancellation hurdles. 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.”
Adobe said it will refute the FTC’s claims in court.
In a statement on its website, Adobe’s Dana Rao, General Counsel and Chief Trust Officer, said: “Subscription services are convenient, flexible and cost-effective to allow users to choose the plan that best fits their needs, timeline and budget.
“Our priority is to always ensure our customers have a positive experience. We are transparent with the terms and conditions of our subscription agreements and have a simple cancellation process. We will refute the FTC’s claims in court.”
According to the complaint, when consumers purchase a subscription, which was adopted as a model by Adobe in 2012, through the company’s website, Adobe prominently shows the “annual paid monthly” subscription plan and pre-selects it as a default. The company buries the early termination fee (ETF) and its amount, which is 50 percent of the remaining monthly payments when a consumer cancels in their first year. Adobe’s ETF disclosures are buried on the company’s website in small print or require consumers to hover over small icons to find the disclosures.
In addition to failing to disclose the ETF to consumers when they subscribe, the complaint also alleges that Adobe uses the ETF to ambush consumers to deter them from cancelling their subscriptions. The complaint also alleges that cancellation processes are designed to make cancellation difficult for consumers, who are forced to navigate numerous pages on the website in order to cancel.
When consumers reach out to Adobe’s customer service to cancel, they encounter resistance and delay from Adobe representatives. Consumers also experience other obstacles, such as dropped calls and chats, and multiple transfers. Some consumers who thought they had successfully cancelled their subscription reported that the company continued to charge them until discovering the charges on their credit card statements.
The complaint charges that Adobe’s practices violate the Restore Online Shoppers’ Confidence Act.
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