Adobe’s Hidden Cancellation Fee Is Illegal, FTC Lawsuit Says

Adobe prioritized profits while spending years ignoring numerous complaints from users struggling to cancel expensive subscriptions without incurring costly hidden fees, the US Federal Trade Commission (FTC) alleged in a lawsuit on Monday.

According to the FTC, Adobe knew that canceling subscriptions was difficult, but determined that making it easier to cancel would hurt revenue, so Adobe never changed the “complicated” process. Even when the FTC launched an investigation in 2022 specifically indicating that Adobe’s practices may be illegal, Adobe did nothing to address the alleged harm to consumers, the FTC complaint noted. Adobe also “offers refunds or only partial refunds to some subscribers who incur charges after a failed cancellation attempt.”

Adobe “repeatedly chose not to rectify some of its illegal practices because of the revenue implications,” the FTC alleged, asking a jury to permanently enjoin Adobe from continuing the apparently deceptive practices.

Dana Rao, Adobe’s general counsel and chief fiduciary officer, provided a statement confirming to Ars that Adobe plans to defend its business practices against the FTC’s claims.

“Subscription services are convenient, flexible and cost-effective to allow users to choose the plan that best suits their needs, schedule and budget,” Rao said. “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 contest the FTC’s claims in court.”

Cancellation fee allegedly used as a retention tool

The government’s heavily redacted complaint laid out Adobe’s alleged scheme, which begins with “manipulative enrollment practices.”

To lock subscribers into recurring monthly payments, Adobe typically defaulted to its most popular “monthly annual payment” plan, the FTC alleged. That subscription option locked users into an annual plan despite paying month-to-month. If they canceled after a two-week period, they would owe Adobe an early termination fee (ETF) that costs 50 percent of their remaining annual subscription. The “material terms” of this fee are hidden during enrollment, the FTC stated, and only appear in “disclosures that are designed to fly under the radar and that most consumers never see.”

For individual users, accessing Adobe’s suite of applications can cost more than $700 a year, Bloomberg reported. For many users suddenly faced with paying hundreds worth of ETFs and losing access to services instantly, the decision to cancel is not as simple as it could be without the hidden fee. the FTC alleged.

Because Adobe supposedly only alerted users to the ETF in small print (by hovering over a small icon or clicking on a hyperlink in small text), while the company’s cancellation flows made it difficult to end the recurring payments, the FTC is suing and accusing Adobe of deceptive practices. under the FTC Act.

Additionally, Adobe’s “stealth ETF” may violate the Restoring Online Shoppers’ Confidence Act (ROSCA), the FTC alleged.

According to ROSCA, Adobe’s ETF could be considered a “negative feature option” because Adobe allegedly does not clearly disclose the ETF during subscriptions. Therefore, Adobe only gets a customer to agree to pay the ETF by “silence or failing to take affirmative action to reject goods or services or cancel the agreement.”

ROSCA only allows online businesses to charge for goods or services through a negative feature option under certain conditions. In Adobe’s case, the ETF would have had to be clearly disclosed before billing information was collected. Otherwise, the customer should have been asked to give informed consent, or Adobe should have provided “simple mechanisms to stop recurring charges.”

Adobe did none of that, the FTC alleged, failing to provide “an easy way” to end subscriptions and harming customers who were “ambushed” by ETFs that “can sometimes cost several hundred dollars.”

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