US government sues Adobe over hidden termination fees

The U.S. government has initiated legal action against Adobe on Monday, alleging that the company, known for products like Photoshop and Acrobat, has misled consumers by not adequately disclosing substantial termination fees in its popular subscription plan. The Federal Trade Commission (FTC) filed a complaint in the federal court in San Jose, California, stating that Adobe hides these fees, which can be significant, and other essential terms in its ‘annual paid monthly’ subscription plan within fine print, textboxes, and hyperlinks.

The complaint highlights that Adobe calculates early termination fees at 50% of the remaining payments for customers who cancel within the first year. Additionally, the FTC accuses Adobe of creating hurdles for subscribers attempting to cancel, such as requiring them to navigate through multiple pages online or facing challenges like disconnections and delays when canceling over the phone.

In response, Adobe’s General Counsel and Chief Trust Officer, Dana Rao, defended the company’s subscription services, emphasizing their convenience, flexibility, and cost-effectiveness. Rao stated that Adobe is transparent about subscription terms and offers a straightforward cancellation process.

Although subscription revenues constitute a significant portion of Adobe’s earnings, with subscriptions contributing $4.92 billion out of $5.18 billion in revenue for the quarter ending March 1, the FTC’s lawsuit accuses Adobe of violating the Restore Online Shoppers’ Confidence Act, seeking civil penalties, an injunction against further misconduct, and other remedies.