The FTC has sued Adobe in federal court alleging the Photoshop titan and two of its executives deceived artists by concealing termination fees for its subscription software.

The complaint, filed by the US Department of Justice on Monday and made public in redacted form, claims "Adobe fails to adequately disclose to consumers that by signing up for the 'Annual, Paid Monthly' subscription plan ('APM plan'), they are agreeing to a year-long commitment and a hefty early termination fee ('ETF') that can amount to hundreds of dollars."

If that's true, then Adobe was hitting subscribers with, for them, unexpected costs if they simply canceled a paid-by-month plan before the year was out.

The corporation's practices, it's said, thus trapped creatives in subscriptions they no longer wanted, in violation of e-commerce legislation signed into law at the end of 2010, the Restore Online Shoppers’ Confidence Act. That legislation limits the use of "negative option features" - taking consumer inaction as a sign of consent - and sales by a third-party merchant who obtained customer data immediately following a transaction with another vendor.

"Americans are tired of companies hiding the ball during subscription signup and then putting up roadblocks when they try to cancel," said Samuel Levine, Director of the FTC’s Bureau of Consumer Protection, in a statement. "The FTC will continue working to protect Americans from these illegal business practices."

The complaint contends that Adobe hides the terms of its APM plan using small text and behind interface elements "that are designed to go unnoticed." It also argues that Adobe deters subscription cancellations through needlessly complicated processes.

Adobe customers for years have trumpeted their dislike of the graphics giant's customer retention practices on social media sites such as Reddit, which is full of complaints about Adobe's cancellation fees.

At least since June 2022, Adobe has been aware that it might get dragged into court over its business practices. When the software slinger reported its Q4 and FY 2023 financial results in December, it warned it could face significant fines or penalties as a result of the FTC's inquiry into its subscription cancellation policies.

In its Form 8-K filing to the SEC, the developer said: "We believe our practices comply with the law and are currently engaging in discussion with FTC staff." And Adobe maintained that stance in a public statement on Monday.

“Subscription services are convenient, flexible and cost effective to allow users to choose the plan that best fits their needs, timeline and budget," said Dana Rao, Adobe's General Counsel and Chief Trust Officer.

"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. We will refute the FTC’s claims in court."

We will refute the FTC’s claims in court

The FTC complaint seeks to hold accountable two executives, Maninder Sawhney, SVP of Digital Go To Market & Sales; and David Wadhwani, president of Digital Media Business. The American watchdog agency argues the two execs devised and oversaw Adobe's disputed subscription practices.

This is not the first time the FTC has sought to hold executives responsible. But the consequences for those named may not be consequential. In 2021, for example, the regulator filed a complaint [PDF] against MoviePass (which shut down in 2020 after a 2019 security breach), Helios, and Matheson Analytics, and two executives.

The agency alleged the companies and their leaders engaged in a usage throttling scheme by invalidating the passwords of frequent users of MoviePass so they could not use the service and add to the biz's losses. The settlement order [PDF] requires data security and compliance commitments but doesn't otherwise inconvenience the two execs who neither admitted nor denied the charges. ®

https://www.theregister.com//2024/06/17/adobe_sued_cancel_fees/