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June 18, 2024

US government sues Adobe over alleged ‘trapping’ of subscribers

FTC accuses the company of deliberately burying fees and trapping customers into subscription plans.

By Livia Giannotti

The US government is suing Adobe, alleging that the software giant’s hidden termination fees and complicated subscription cancellation process violate consumer protection laws.

The Adobe logo on a mobile phone, backdropped by a larger version of the Adobe logo.
Adobe is accused of violation federal customer laws. (Photo: Shutterstock)

The Federal Trade Commission (FTC) filed a complaint at a California court on Monday saying the company behind Photoshop, Acrobat and Illustrator has “harmed consumers” for years, by failing to clearly disclose its plan terms. 

According to FTC’s accusations, Adobe’s “Annual, Paid Monthly” subscription plan – its most popular package – involves a year-long commitment and early termination fees often amounting to “hundreds of dollars” that are effectively hidden from consumers when they sign up. The FTC claims that Adobe uses these termination fees as a “powerful retention tool” which “traps” consumers into continuing their subscriptions.

The antitrust agency also accuses Adobe of deliberately hiding important plan terms “in fine print and behind optional textboxes and hyperlinks”, and staging an “onerous and complicated” cancellation process, thereby further ambushing consumers.

“Through these practices, Adobe has violated federal laws designed to protect consumers,” the complaint states. Samuel Levine, the director of the FTC’s Bureau of Consumer Protection added that “Americans are tired of companies hiding the ball during subscription signup and then putting up roadblocks when they try to cancel.”

In a statement responding to the suit, the company’s CTO Dana Rao said Adobe would refute the FTC’s accusations in court. “Subscription services are convenient, flexible and cost-effective [ways] to allow users to choose the plan that best fits their needs, timeline and budget,” he said. “Our priority is to always ensure our customers have a positive experience.” Rao also affirmed that the company is “transparent with the terms and conditions” of its subscription plans and claimed that the cancellation processes are “simple”.

However, the complaint alleges that Adobe is aware of these accusations but refuses to change its practices as they financially benefit it. The software giants’s revenue is mainly based on money generated from subscriptions. According to Reuters, subscriptions accounted for 95% of Adobe’s $5.18 billion of revenue in this year’s first quarter.

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For example, the FTC said consumers reported “resistance and delay”, including dropped calls and multiple transfers from customer service when they tried to cancel their subscriptions. Other users allegedly kept being charged after thinking they had cancelled their subscriptions.

Adobe’s senior vice president of digital go to market & sales Maninder Sawhney as well as the president of digital media business David Wadhwani are also targeted by this lawsuit, as they “formulated, directed, controlled, had the authority to control, or participated” in the company’s alleged breaches of federal laws.

The FTC seeks to impose financial penalties for violating the Restore Online Shoppers’ Confidence Act.

Read more: New Adobe AI services debuted amid model training controversy

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