U.S. Government Sues Adobe for Concealing Fees, Complicating Cancellations

U.S. Government Sues Adobe for Concealing Fees
The U.S. government has filed a lawsuit against Adobe, the company behind Photoshop and Acrobat, accusing it of harming consumers by hiding hefty termination fees in its most popular subscription plan and making it difficult to cancel subscriptions.

The complaint, filed in the federal court in San Jose, California, alleges that Adobe conceals these fees, which can amount to hundreds of dollars, along with other critical terms in its “annual paid monthly” subscription plan. These details are often buried in fine print or hidden behind textboxes and hyperlinks.

According to the complaint, Adobe calculates early termination fees as 50% of the remaining payments if consumers cancel within the first year.

The U.S. Government Has Filed a Lawsuit Against Adobe

The Federal Trade Commission (FTC) also claims that Adobe forces subscribers wanting to cancel online to navigate through numerous pages, while those canceling by phone frequently face disconnections, repeated conversations with multiple representatives, and resistance and delays from those representatives.

Two Adobe executives, David Wadhwani, the president of digital media business, and Maninder Sawhney, a senior vice president in digital sales, are also named as defendants.

“Adobe trapped customers into year-long subscriptions through hidden early termination fees and numerous cancellation hurdles,” said Samuel Levine, director of the FTC consumer protection bureau. “Americans are tired of companies hiding the ball during subscription signup and then putting up roadblocks when they try to cancel.”

Dana Rao, Adobe’s general counsel and chief trust officer, stated that the company will contest the FTC’s claims in court. “Subscription services are convenient, flexible, and cost-effective, allowing users to choose the plan that best fits their needs, timeline, and budget,” Rao said. “We are transparent with the terms and conditions of our subscription agreements and have a simple cancellation process.”

Adobe Inc. Q2 2024 financial highlights:
Record Revenue: Adobe (ADBE) achieved record revenue of $5.31 billion, driven by strong growth across Creative Cloud, Document Cloud, and Experience Cloud. Revenues of $5.31B(+10.24% YoY) exceeded consensus of $5.29B(+0.35%).
Segment… pic.twitter.com/GEvHBtwhp8

— Iri Kai (@irina_kainz) June 14, 2024

Subscriptions made up $4.92 billion, or 95%, of Adobe’s $5.18 billion in revenue for the quarter ending March 1.

The FTC accused Adobe of violating the Restore Online Shoppers’ Confidence Act, a 2010 federal law that prohibits merchants from imposing charges, including for automatic subscription renewals, unless they clearly disclose material terms and obtain customers’ informed consent.

The lawsuit seeks civil penalties, an injunction to prevent further violations, and other remedies. The case is titled U.S. v. Adobe Inc et al, in the U.S. District Court, Northern District of California, No. 24-03630.

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