The US government filed a lawsuit against Photoshop and Acrobat maker Adobe on Monday. The San Jose, California-based American software company and two of its executives are accused of harming consumers by hiding high cancellation fees for the most popular subscription plan and making it difficult to cancel subscriptions.
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In a lawsuit filed by the US Department of Justice in response to a notice from the US Federal Trade Commission (FTC) in the US Federal Court for the Northern District of California in San Jose (Case No. 5:24-cv-03630), Adobe and executives David Wadhwani, Chief Media Officer, charged Digital, and Maninder Sawhney, senior vice president of digital sales, lured consumers into one-year subscriptions with “hidden pre-payment penalties and numerous cancellation hurdles.” But consumers were poorly informed that opting out could cost hundreds of dollars in the first year, according to a statement from the regulator.
Adobe has primarily moved to a subscription model since 2012, requiring consumers to pay for access to the software on a recurring basis. These subscriptions represent the majority of the company's revenue.
Hidden fees and difficult cancellations
According to the complaint, Adobe charges a prepayment penalty of 50 percent of remaining payments if a customer cancels in the first year. In contrast, the fees, terms and other important terms and conditions of the “monthly subscription paid annually” on the company’s website are hidden in small print or behind text boxes and hyperlinks. Therefore, many consumers do not realize that the Annual Postpaid plan requires the subscription to continue for a year. Although Adobe is aware of consumers' problems with its subscription plan, the company continues its practices, and the FTC complains.
Adobe's termination process is also designed to make termination more difficult for consumers. According to the US trade regulator, Adobe forces subscribers who want to cancel online to click unnecessarily on many pages, while subscribers who cancel by phone face “resistance and delay from Adobe employees.”
“Americans are tired of companies that pass the ball to them when they sign contracts and then stand in their way when they try to cancel,” said FTC Director Samuel Levin. “The FTC will continue to work to protect Americans from these illegal business practices.” The Federal Trade Commission's Consumer Protection Bureau said in a statement to the regulator.
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