FTC Sues Adobe for Allegedly ‘Trapping’ Customers Into Annual Plans

The Adobe logo is displayed on the side of the Adobe Systems headquarters in San Jose, Calif., on Jan. 15, 2010. (Justin Sullivan/Getty Images)

The U.S. Federal Trade Commission (FTC) filed a lawsuit against tech firm Adobe for allegedly forcing consumers to continue their subscriptions by threatening to impose hefty fees if they tried to cancel the plans.

The lawsuit was filed on June 17 at the U.S. District Court Northern District of California against Adobe and two of its executives. It alleges the company has “harmed consumers by enrolling them in its default, most lucrative subscription plan without clearly disclosing important plan terms.”

When consumers sign up for Adobe’s “Annual, Paid Monthly” (APM) subscription plan, the company “fails to adequately disclose” that the individuals were agreeing to a year-long commitment, the lawsuit states. If the consumers cancel their APM plan before the term runs out, they will be charged a hefty early termination fee (ETF) that can run into hundreds of dollars.

Adobe only explicitly discloses the ETF to consumers when they try to cancel their subscriptions. The ETF thus becomes a “powerful retention tool” that works by “trapping consumers in subscriptions they no longer want,” according to the lawsuit.

An annual ETF plan is calculated at 50 percent of the “remaining contract obligation.” Consumers must pay this amount in a lump sum when canceling subscriptions.

“During enrollment, Adobe hides material terms of its APM plan in fine print and behind optional textboxes and hyperlinks, providing disclosures that are designed to go unnoticed and that most consumers never see,” the lawsuit reads.

And when consumers decide to cancel, Adobe uses “onerous and complicated” cancelation processes.

Adobe defended itself against the FTC complaint.

Dana Rao, the firm’s general counsel and chief trust officer, said that its subscription services are cost-effective options that allow consumers to choose plans that fit their budget, timeline, and needs.

Adobe is “transparent with the terms and conditions of our subscription agreements and have a simple cancellation process,” he said in a statement on June 17. “Our priority is to always ensure our customers have a positive experience.”

The company intends to refute the FTC’s claims in court.

Subscribers allegedly faced resistance and delays from Adobe representatives when seeking to cancel their plans, the FTC said. Some of them experienced dropped calls and multiple transfers during the cancellation process.

“Through these practices, Adobe has violated federal laws designed to protect consumers,” the lawsuit states.

Samuel Levine, director of the FTC’s Bureau of Consumer Protection, criticized the tech giant for the practice.

“Americans are tired of companies hiding the ball during subscription signup and then putting up roadblocks when they try to cancel. The FTC will continue working to protect Americans from these illegal business practices,” he said in a statement.

Crackdown on Deceptive Subscriptions

The FTC has previously taken action against other firms for alleged deceptive subscription policies. In 2023, the agency took action against Amazon for enrolling consumers in its Prime program without their consent and sabotaging customer attempts to cancel their subscriptions.

Amazon was accused of using “manipulative, coercive, or deceptive user-interface designs known as ‘dark patterns; to trick consumers into enrolling in automatically-renewing Prime subscriptions,” the FTC stated in a press release on June 2023.

Amazon also allegedly rejected changes that would have made it easier for consumers to cancel their Prime subscription because doing so would have affected the firm’s bottom line, the agency said.

Amazon denied the charges at the time. A spokesperson disputed the allegations in an email statement to The Epoch Times: “The FTC’s claims are false on the facts and the law. The truth is that customers love Prime, and by design, we make it clear and simple for customers to both sign up for or cancel their Prime membership.”

In 2022, the FTC took similar action against internet phone service provider Vonage, which was accused of creating obstacles for customers who tried to cancel their service. The agency eventually ordered the company to pay $100 million in refunds to customers affected by such actions.

In March last year, the FTC proposed rules to make it easier for consumers to cancel their recurring subscriptions and memberships. The “Click to Cancel” proposal requires sellers to make cancellation processes as easy as enrollment.

“The proposal would save consumers time and money, and businesses that continued to use subscription tricks and traps would be subject to stiff penalties,” said FTC Chair Lina M. Khan in a statement at the time.