FTC Sues Adobe For Deceiving Customers and Making It Hard to Cancel Subscriptions

The Federal Trade Commission has filed a lawsuit against Adobe, targeting how the company handles subscriptions and early termination fees....
FTC Sues Adobe For Deceiving Customers and Making It Hard to Cancel Subscriptions
Written by Matt Milano
  • The Federal Trade Commission has filed a lawsuit against Adobe, targeting how the company handles subscriptions and early termination fees.

    The lawsuit, which was filed against Adobe and executives Maninder Sawhney and David Wadhwani, accuses Adobe of “deceiving consumers by hiding the early termination fee for its most popular subscription plan and making it difficult for consumers to cancel their subscriptions.”

    Adobe used to sell its applications individually, or as part of a “Creative Suite,” as a standalone product. Users would purchase a major version, receive free updates for the life of that version, and then decide whether or not to upgrade to the next major version—usually at a steep discount—when it was released. With the rise of cloud computing and subscription-based software, Adobe transitioned to providing its software via subscription as well.

    Unfortunately, the FTC says that Adobe essentially trapped customers into a year-long subscription by hiding the fact that customers who opted for the “annual paid monthly” plan would face hundreds of dollars in termination fees if they cancelled in the first year.

    According to the complaint, when consumers purchase a subscription through the company’s website, Adobe pushes consumers to its “annual paid monthly” subscription plan, pre-selecting it as a default. Adobe prominently shows the plan’s “monthly” cost during enrollment, but it buries the early termination fee (ETF) and its amount, which is 50 percent of the remaining monthly payments when a consumer cancels in their first year. Adobe’s ETF disclosures are buried on the company’s website in small print or require consumers to hover over small icons to find the disclosures.

    To make matters worse, the FTC says that customers who reached out to Adobe for a resolution faced a litany of roadblocks, including resistance, delays, dropped calls, dropped chats, and multiple transfers.

    “Adobe trapped customers into year-long subscriptions through hidden early termination fees and numerous cancellation hurdles,” said Samuel Levine, Director of the FTC’s Bureau of Consumer Protection. “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.”

    Adobe has long been a necessary evil for many designers. While the company makes the most powerful graphics software available, virtually no one actually likes dealing with the company, or paying the prices it charges.

    Adobe Shows Why the Figma Acquisition Was a Bad Idea

    The FTC’s lawsuit is proof that regulators blocking Adobe’s acquisition of Figma was a good idea and in the best interests of consumers. Figma is a popular web-based suite of creative tools that competes favorably with Adobe’s offerings, but at a fraction of the cost.

    In September 2022, Adobe announced plans to purchase Figma, causing an uproar among designers who feared the larger company would ruin what made Figma so popular. Regulators expressed concern as well, viewing the purchase as a way for Adobe to eliminate a competitor and maintain its ability to charge high prices.

    The UK’s Competition and Markets Authority (CMA), in particular, called out the deal as one that would eliminate competition and hurt designers.

    The inquiry group has also provisionally found that Figma is a credible future competitor to Adobe in image editing and illustration software – and that the threat posed by Figma has driven product development in Adobe’s Photoshop and Illustrator applications, including new web versions. The inquiry group considers that if the deal went ahead, it would eliminate Figma as a competitor which would otherwise have continued to seek to develop its capabilities in image editing and illustration, thereby fuelling innovation and product development by Adobe. This competition would be lost as a result of the transaction, harming designers and creative agencies who might have used these new tools or relied on future updates.

    As a result of the CMA’s ruling, Adobe ultimately abandoned its plans to acquire Figma.

    Hopefully, the FTC’s action against Adobe will result in fairer terms for designers who are still forced to use the software giant’s products.

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