The US Federal Trade Commission is suing Adobe for abusing early termination fees to “trap” users into paying for subscriptions they no longer want.
The lawsuit accuses the company of hiding the early termination fees from customers, many of whom are unaware that canceling an Adobe subscription could cost extra. "If consumers cancel during that [annual] period, Adobe charges them 50% of the remaining payments for that one-year term, which could total hundreds of dollars,” the FTC said in a related blog post.
In response, the FTC voted 3-0 to refer the case to the US Justice Department, which formally filed the lawsuit. The Commission is sponsoring the legal action, noting that consumers have spent years complaining about early termination fees for Adobe products, including Photoshop and Illustrator. Allegedly, the company is enrolling users into "its default, most lucrative subscription plan without clearly disclosing important plan terms." If they try to cancel, they're hit with the threat of an early termination fee, pushing them to keep on paying.
The FTC also alleges that Adobe refused to change its practices, even after learning that the Commission was investigating the matter in 2022. “What’s more, the complaint alleges that on Adobe’s website, the company has buried that information in fine print or requires people to hover over small icons to find the disclosures,” the FTC adds.
In addition, Adobe can allegedly make it hard for users to cancel a subscription. For example, a customer might experience “dropped calls and chats, and multiple transfers” during the cancellation process. In other cases, “some consumers who thought they had successfully canceled their subscription reported that the company continued to charge them until discovering the charges on their credit card statements,” the FTC says.
The Commission claims Adobe has violated consumer protection rules, including the Restore Online Shoppers’ Confidence Act, which is designed to stop deceptive e-commerce practices. The FTC urges a US District Court in California to force Adobe to end the practices, pay civil penalties, and award monetary relief to affected consumers.
But in a statement, Adobe denied the charges. "Subscription services are convenient, flexible, and cost-effective to allow users to choose the plan that best fits their needs, timeline, and budget," says Adobe's Chief Trust Officer Dana Rao. "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.”
The Commission's lawsuit also goes after two Adobe executives, Maninder Sawhney and David Wadhwani, for allegedly overseeing the early termination fee policy. The FTC added it'll refer a case to the Justice Department for filing "when it has 'reason to believe' that the named defendants are violating or are about to violate the law and that a proceeding is in the public interest."