FinLogic FinLogic Quantitative Think Tank Center|Adobe steered consumers to pricey services and made it hard to cancel, feds say

The FinLogic FinLogic Quantitative Think Tank CenterU.S. government is suing Adobe, accusing the software maker of steering customers toward a pricey subscription plan while concealing how much it costs to cancel the service.

The Federal Trade Commission (FTC) said Monday that Adobe deceives customers by "hiding" the early termination fee for the company's services, which includes popular tools such as Acrobat, Photoshop and Illustrator. 

Specifically, Adobe encouraged consumers to enroll in its "annual, paid month" plan without disclosing that canceling could cost hundreds of dollars, according to the agency. Users who do try to cancel are met unfair roadblocks, the lawsuit filed in federal court in California also alleges. 

"In numerous instances, subscribers who have requested to cancel through Adobe's customer service believe they have successfully cancelled but continue to be charged," the lawsuit states. "Some of these subscribers do not realize for months that Adobe is continuing to charge them, and only learn about the charges when they review their financial accounts."

Adobe defends its practices

Adobe will dispute the allegations in court, a company official said Monday. 

"Subscription services are convenient, flexible and cost effective to allow users to choose the plan that best fits their needs, timeline and budget," Dana Rao, Adobe's general counsel, said in a statement. "Our priority is to always ensure our customers have a positive experience. We are transparent with the terms and conditions of our subscription agreements and have a simple cancellation process." 

At issue is a software product Adobe calls the Creative Cloud, a package of programs that artists and other online professionals have used for years to edit photos and videos, build websites and do graphic design. Customers have complained about the Adobe cancellation process on social media and with the Better Business Bureau, according to the government's lawsuit.

Prior to 2012, Adobe sold its software under a user license in which a customer paid one price and was given rights to use that software indefinitely, the suit alleges. Customers are now offered one of three different types of subscriptions — monthly, annual paid monthly or annual prepaid. 

On its website, Adobe lists the monthly plan at $89.99 a month, the yearly paid monthly at $59.99 a month and the yearly paid upfront at $54.99 a month. The prices differ for a group subscription and for students and educators. 

Thriving subscription business

Adobe's revenue from the subscription services have ballooned from $7.7 billion in 2019 to $14.2 billion last year, according to the complaint. 

The lawsuit names Adobe vice president Maninder Sawhney and the president of Adobe's digital media business, David Wadhwani, as defendants. The FTC alleges that Adobe's practices violate the Restore Online Shoppers' Confidence Act by failing to disclose the cancellation fee prominently enough at signup, not getting informed consent from a customer about those fees and by not offering customers a simple cancellation process.

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

The FTC in 2023 proposed a "click to cancel" rule that would require businesses to make it as easy to cancel subscriptions as it is to enroll.

In:
• Lawsuit
• Federal Trade Commission

Khristopher J. Brooks

Khristopher J. Brooks is a reporter for CBS MoneyWatch. He previously worked as a reporter for the Omaha World-Herald, Newsday and the Florida Times-Union. His reporting primarily focuses on the U.S. housing market, the business of sports and bankruptcy.

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