Yahoo Finance Adobe Sued by US Regulators Over Subscription Cancellations
(Bloomberg) -- The US Federal Trade Commission sued Adobe Inc., alleging the software company violated consumer protection laws by making it too difficult for consumers to cancel their subscriptions.
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Adobe pushed users toward annual subscriptions to its creative software such as Photoshop without “adequately disclosing” that canceling in the first year could cost hundreds of dollars, the FTC said Monday in a statement. The San Jose, California-based company also designed the cancellation process to be difficult, requiring navigating many online pages or transfers between customer services representatives, the regulators said.
“Adobe trapped customers into yearlong subscriptions through hidden early termination fees and numerous cancellation hurdles,” said Samuel Levine, director of the FTC’s Bureau of Consumer Protection. The Justice Department filed the complaint in a California federal court on behalf of the FTC, which enforces US consumer protection laws.
Adobe said it will challenge the FTC’s claim in court. “Our priority is to always ensure our customers have a positive experience,” Dana Rao, the company’s general counsel, said in a statement. “We are transparent with the terms and conditions of our subscription agreements and have a simple cancellation process.”
Users of Adobe products have long complained about the expense of canceling a subscription. Accessing Adobe’s suite of apps can cost more than $700 annually for individuals. Subscribers must cancel within two weeks of buying a subscription to receive a full refund; otherwise, they incur a prorated penalty. Some other digital services such as those from Spotify Technology SA and Netflix Inc. don’t charge a cancellation fee.
Company management knows that consumers are often confused about the terms of the agreement, regulators wrote in the complaint. Adobe’s subscription-pricing model provides an incentive to lock customers into longer-term contracts and discourage cancellation, they wrote.
The lawsuit alleges that Adobe’s tactics violate a 2010 consumer protection law designed to protect online shoppers.
Last year, the FTC sued Amazon.com Inc. under the same law for allegedly duping consumers into signing up for its Prime membership service and deliberately making it hard to cancel.
Adobe disclosed in December that the FTC was investigating its subscription practices. The FTC first asked the company for information on the topic in June 2022, regulators wrote in the lawsuit.
(Updates with comments from company in the fourth paragraph.)
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