FTC sues Adobe over deceptive subscription practices and hidden fees

The Federal Trade Commission (FTC) has initiated legal action against software giant Adobe and two of its top executives, alleging deceptive business practices related to hidden fees and barriers to canceling subscriptions. This move by the consumer watchdog agency aims to protect consumers from being trapped in costly subscriptions they may not have fully understood or intended to commit to.

Adobe Accused of Obscuring Early Termination Fees

At the center of the FTC's complaint is Adobe's alleged failure to adequately disclose the existence and amount of an early termination fee (ETF) associated with its popular "annual paid monthly" subscription plan. According to the FTC, Adobe prominently displays the monthly cost of this plan during the sign-up process but buries information about the hefty ETF, which can amount to 50% of the remaining balance if a customer cancels within the first year.

The agency claims that Adobe conceals the ETF details in fine print or requires consumers to hover over small icons to find the disclosures. As a result, many customers report being unaware of the existence of the ETF or the fact that the "annual paid monthly" plan requires a year-long commitment.

Despite being aware of consumer confusion surrounding the ETF, Adobe is accused of continuing to steer customers toward this plan while obscuring the termination fee information.

Cancellation Process Designed to Deter Customers

In addition to the hidden ETF, the FTC alleges that Adobe's cancellation processes are intentionally complex and designed to make it difficult for customers to cancel their subscriptions. According to the complaint, when consumers attempt to cancel through Adobe's website, they are forced to navigate numerous web pages, encountering resistance and delays from customer service representatives.

Consumers have reported experiencing dropped calls, chat transfers, and continued billing even after believing they had successfully canceled their subscriptions. The FTC argues that these practices violate the Restore Online Shoppers' Confidence Act, which aims to protect consumers from deceptive online business practices.

Executives Named in the Complaint

The FTC's complaint names two Adobe executives, Maninder Sawhney and David Wadhwani, as being responsible for devising and overseeing the company's alleged unlawful subscription practices. Sawhney is an Adobe vice president, while Wadhwani is the president of Adobe's digital media business.

By holding these executives accountable, the FTC aims to send a strong message to companies and their leadership about the importance of transparency and consumer protection in subscription-based business models.

Adobe Vows to Fight the Allegations

In response to the FTC's action, Adobe has vowed to refute the claims in court. The company maintains that it is transparent about the terms and conditions of its subscription agreements and that its cancellation process is simple.

"Our priority is to always ensure our customers have a positive experience," said Dana Rao, Adobe's general counsel and chief trust officer. "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."

Implications for the Tech Industry

The FTC's action against Adobe and its executives is part of a broader effort by regulators to address consumer protection issues in the tech industry, particularly related to subscription-based business models and deceptive marketing practices.

The outcome of this case could have significant implications for how tech companies disclose fees, handle cancellations, and structure their subscription offerings. It may also set a precedent for holding executives personally accountable for deceptive business practices.

As the case unfolds, it will be closely watched by consumers, industry analysts, and other tech companies, as it could shape the future of subscription-based services and the regulatory landscape surrounding consumer protection in the digital age.

The FTC's legal action against Adobe and its executives represents a significant step in addressing alleged deceptive practices related to hidden fees and cancellation barriers in the software industry. By taking on a major player like Adobe, the FTC aims to send a strong message about the importance of transparency and consumer protection in subscription-based business models. The outcome of this case could have far-reaching implications for the tech industry and how companies structure and market their subscription offerings.