Adobe Sued by US Government for Hiding Termination Fees in Subscription Plan
The U.S. government sued Adobe on Monday, accusing the maker of Photoshop and Acrobat of hurting consumers by hiding high termination fees in its most popular subscription plan and making it difficult to cancel subscriptions.
In a complaint filed in federal court in San Jose, California, the Federal Trade Commission alleged that Adobe hid the fees, sometimes running into hundreds of dollars, and other important terms of its “annual monthly payment” subscription plan in fine print or behind text boxes and hyperlinks.
According to the complaint, Adobe charges early termination fees at 50 percent of the remaining payments when consumers cancel within the first year.
The FTC also said that Adobe forces subscribers who want to cancel online to needlessly navigate through numerous pages, while people who cancel by phone are often disconnected, have to repeat themselves to multiple agents and encounter “resistance and delays” from those agents.
Two Adobe executives are also being sued: David Wadhwani, the president of the digital media division, and Maninder Sawhney, a senior vice president of digital sales.
“Adobe has locked customers in for a year with hidden early termination fees and numerous cancellation barriers,” said Samuel Levine, director of the FTC Consumer Protection Bureau. “Americans are tired of companies hiding the ball when they sign up for a subscription and then throwing obstacles in their way when they try to cancel.”
Dana Rao, Adobe’s general counsel and chief trust officer, said the San Jose company will fight the FTC’s claims in court.
“Subscription services are convenient, flexible and cost-effective, allowing users to choose the plan that best suits their needs, timeline and budget,” Rao said. “We are transparent with the terms and conditions of our subscription agreements and have an easy cancellation process.”
Subscriptions accounted for $4.92 billion, or 95 percent, of Adobe’s $5.18 billion in revenue for the quarter ended March 1.
The FTC accused Adobe of violating the Restore Online Shoppers’ Confidence Act, a 2010 federal law that prohibits merchants from charging fees, including for automatic subscription renewals, unless they clearly disclose material terms and obtain customer informed consent.
Monday’s lawsuit seeks civil penalties, a ban on further misconduct and other measures.
The case is U.S. v. Adobe Inc et al, U.S. District Court, Northern District of California, No. 24-03630.
© Thomson Reuters 2024
