The FTC has taken Adobe to federal court, alleging the Photoshop titan and two of its executives deceived artists by hiding termination fees for its subscription software.
The complaint, filed Monday by the U.S. Department of Justice and made public in redacted form, alleges that “Adobe failed to adequately disclose to consumers that by signing up for the ‘Annual, Paid Monthly” plan (“APM plan”) agree to a one-year commitment and a hefty early termination fee (“ETF”) that can amount to hundreds of dollars.”
If true, Adobe would be leaving its subscribers with unexpected costs if they simply canceled a monthly subscription before the year was out.
It’s said the company’s practices trapped creatives in subscriptions they no longer wanted, in violation of e-commerce legislation signed into law in late 2010: the Restore Online Shoppers’ Confidence Act. That legislation restricts the use of “negative option features” – treating consumer inaction as a sign of consent – and sales by a third-party merchant who obtained customer data immediately after a transaction with another seller.
“Americans are tired of companies playing ball during sign-up and then putting up roadblocks when they try to cancel,” Samuel Levine, director of the FTC’s Bureau of Consumer Protection, said in a statement. “The FTC will continue to work to protect Americans from these illegal business practices.”
The complaint states that Adobe hides the terms of its APM plan using small text and behind interface elements “designed to go unnoticed.” It also states that Adobe deters subscription cancellations through unnecessarily complicated processes.
Adobe customers have for years expressed their distaste for the graphics giant’s customer retention practices on social media sites like Reddit, which has been riddled with complaints about Adobe’s cancellation fees.
Adobe has been aware since at least June 2022 that it could be sued over its business practices. When the software lurcher reported its fourth-quarter fiscal 2023 financial results in December, the company warned that it could face significant fines or penalties as a result of the FTC’s investigation into its subscription cancellation policy.
In its Form 8-K filing with the SEC, the developer said: “We believe our practices comply with the law and are currently in discussions with FTC staff.” And Adobe maintained that position in a public statement on Monday.
“Subscription services are convenient, flexible and cost-effective, so users can choose the subscription that best fits their needs, timeline and budget,” said Dana Rao, General Counsel and Chief Trust Officer of Adobe.
“Our priority is to always ensure our customers have a positive experience. We are transparent with the terms of our subscription agreements and have a simple cancellation process. We will refute the FTC’s claims in court.”
We will refute the FTC’s claims in court
The FTC complaint seeks to hold two executives accountable: Maninder Sawhney, SVP of Digital Go To Market & Sales; and David Wadhwani, president of Digital Media Business. The US watchdog agency alleges that the two executives created and oversaw Adobe’s controversial subscription practices.
This isn’t the first time the FTC has sought to hold executives accountable. But the consequences for the people mentioned do not have to be serious. For example, in 2021 the regulator filed a complaint [PDF] against MoviePass (which closed in 2020 after a 2019 security breach), Helios and Matheson Analytics, and two executives.
The agency alleged that the companies and their leaders engaged in usage restriction by invalidating the passwords of frequent users of MoviePass, preventing them from using the service and further increasing the company’s losses. The settlement order [PDF] requires data security and compliance obligations, but otherwise poses no inconvenience to the two executives who have neither admitted nor denied the allegations. ®