US government sues Adobe for concealing fees and complicating cancellations
Allegations of hidden fees and difficult cancellations
The US government has taken legal action against Adobe, the maker of Photoshop and Acrobat, accusing the company of misleading consumers by hiding substantial cancellation fees and making the process of cancelling subscriptions unnecessarily difficult.
Filed in the federal court in San Jose, California, the complaint from the Federal Trade Commission (FTC) alleges that Adobe obscures significant fees, sometimes amounting to hundreds of dollars, in the fine print of its "annual paid monthly" subscription plan.
These fees are often buried behind textboxes and hyperlinks, making them difficult for consumers to spot. Specifically, Adobe charges early termination fees calculated as 50% of the remaining payments if consumers cancel within the first year.
Adobe's complicated cancellation process
The FTC also criticised Adobe for the cumbersome process required to cancel subscriptions. Online cancellations involve navigating through numerous pages, while those attempting to cancel via phone often face disconnections, repeated requests for information and resistance from customer service representatives.
Two senior executives at Adobe, David Wadhwani, president of the Digital Media business and Maninder Sawhney, senior vice president in Digital Sales, have also been named as defendants. According to Samuel Levine, director of the FTC's Bureau of Consumer Protection, Adobe has been trapping customers in long-term subscriptions with hidden fees and creating barriers to cancellation.
Dana Rao, Adobe's general counsel and chief trust officer, said the company intends to challenge the FTC's claims in court. Rao defended Adobe's subscription services as convenient, flexible and cost-effective, and asserted that the company is transparent about its terms and conditions and provides a straightforward cancellation process.
Financial impact and legal basis
Subscriptions constitute a significant portion of Adobe's revenue, amounting to $4.92 billion out of $5.18 billion in the quarter ending 1st March. The FTC has accused Adobe of violating the Restore Online Shoppers' Confidence Act of 2010, which prohibits merchants from imposing charges without clearly disclosing material terms and obtaining informed consent from customers.
The lawsuit seeks civil penalties, an injunction to prevent further misconduct and other remedies. The case is being handled in the US District Court for the Northern District of California.
Adobe recently caused a furore by changing its terms of use to allow the company to harvest users' works to train its AI models, allegedly cutting off some who refused to comply.