The Federal Trade Commission (FTC) has launched legal action against software giant Adobe and two of its top executives, Maninder Sawhney, and David Wadhwani, for allegedly deceiving consumers about early termination fees and making it difficult to cancel subscriptions. The Department of Justice (DOJ), following a referral from the FTC, has filed a complaint in a federal court, charging Adobe with pushing consumers toward its “annual paid monthly” subscription plan without adequately disclosing the costly cancellation fees associated with it. “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.”

Details of the FTC Complaint Against Adobe

According to the complaint, Adobe has been steering consumers towards its "annual paid monthly" subscription plan by pre-selecting it as the default option on its website. While the monthly cost is prominently displayed, the early termination fee (ETF) is not. The ETF, which amounts to 50 percent of the remaining monthly payments if the subscription is canceled within the first year, is buried in small print or hidden behind small icons on the website. Consumers have complained to the FTC and the Better Business Bureau, stating they were unaware of the ETF or that the plan required a year-long commitment.

Adobe's Practices

Adobe shifted primarily to a subscription model in 2012, which now accounts for most of its revenue. The complaint alleges that despite knowing about consumer confusion regarding the ETF, Adobe continues to obscure the fee and make it difficult to cancel subscriptions. When consumers try to cancel their subscriptions through Adobe’s website, they must navigate through numerous pages. Those who seek help from customer service face resistance, delays, and additional obstacles, such as dropped calls, chats, and multiple transfers. Some consumers who believed they had canceled their subscriptions later found that Adobe continued to charge them. The FTC charges that Adobe's practices violate the Restore Online Shoppers’ Confidence Act. The Commission voted unanimously (3-0) to refer the civil penalty complaint to the DOJ, which then filed it in the U.S. District Court for the Northern District of California.

Adobe's Response to FTC Complaint

In response to the FTC's complaint, Adobe released a statement through Dana Rao, General Counsel and Chief Trust Officer: “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.”

Adobe Shift to the Subscription Model

Adobe's transition to a subscription model over a decade ago was driven by the digital and cloud-based evolution of the industry. This model was designed to deliver continuous innovation, including cloud-based features and services, more affordably to customers. Subscription-based software and services have become integral to the digital economy, offering numerous benefits such as:

• Continuous Innovation: Subscriptions allow Adobe to deliver ongoing improvements and new features, including those that require cloud computation, without additional cost to customers. For example, Photoshop's Generative Fill feature.
• Multi-Device Usage: Products can be used on multiple devices and across groups of collaborators, providing automatic updates and enhanced security.
• Access to Cloud-Only Services: Subscribers gain access to services like artificial intelligence (AI) tools and other cloud-based functionalities.
• Consumer Choice: Adobe offers various plans, giving consumers the flexibility to choose between lower upfront costs and maximum flexibility.

The FTC's complaint against Adobe brings to light the critical issue of transparency in subscription services. As digital subscriptions become more prevalent, it is essential for companies to be upfront about fees and provide straightforward cancellation processes. This case serves as a reminder that consumer protection agencies will continue to hold companies accountable for deceptive practices, ensuring that consumers are treated fairly in the marketplace. The ongoing legal battle will be closely watched, with significant implications for both Adobe and the wider industry.