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FTC Takes Action Against Adobe and Executives for Hiding Fees, Preventing Consumers from Easily Cancelling Software Subscriptions
The Federal Trade Commission (FTC) has initiated legal action against Adobe and two of its executives, Maninder Sawhney and David Wadhwani, for deceptive practices related to their subscription services. The complaint, filed by the Department of Justice upon referral from the FTC, accuses Adobe of pushing consumers towards its "annual paid monthly" subscription plan without proper disclosure of its early termination fee (ETF), which can cost consumers hundreds of dollars if they cancel within the first year.
Wadhwani, Adobe’s digital media business president, and Sawhney, an Adobe vice president, are at the core of this complaint. Samuel Levine, Director of the FTC’s Bureau of Consumer Protection, noted that "Adobe trapped customers into year-long subscriptions through hidden early termination fees and numerous cancellation hurdles." He stated that Americans are growing increasingly frustrated with companies that obscure critical information during subscription sign-ups and make cancellation processes overly complex.
Image Description: FTC Headquarters in Washington, D.C.
FTC Headquarters in Washington, D.C.
Since 2012, Adobe has heavily relied on subscription models for revenue. The complaint points out that Adobe’s "annual paid monthly" plan, typically pre-selected during subscription, prominently displays the monthly cost but buries the details of the ETF in fine print or within hidden icons. Unsurprisingly, consumers unaware of the ETF or the true nature of the subscription plan have frequently complained to the FTC and the Better Business Bureau.
Despite being aware of the consumer confusion surrounding the ETF, Adobe has continued to push this plan while obscuring the associated fees. Moreover, the complaint alleges that Adobe uses the ETF to ambush consumers and deter them from canceling their subscriptions.
The cancellation process, as designed by Adobe, is another significant barrier for consumers. Complaints indicate that consumers must navigate multiple pages on Adobe’s website and often face resistance, delays, dropped calls, and multiple transfers when seeking cancellation through customer service. Some consumers who believed they had successfully canceled their subscriptions discovered later that Adobe continued to charge them.
The FTC asserts that Adobe’s practices are in violation of the Restore Online Shoppers’ Confidence Act (ROSCA). The FTC voted unanimously to refer the civil penalty complaint to the Department of Justice, which filed it in the U.S. District Court for the Northern District of California. It’s important to note that a complaint is a formal allegation and the decision rests with the court.
The Federal Trade Commission is dedicated to promoting competition, protecting consumers, and educating the public. The FTC will never demand money, make threats, tell you to transfer money, or promise you a prize. For more information about consumer topics, visit consumer.ftc.gov, or to report fraud, scams, and bad business practices, go to ReportFraud.ftc.gov.
Remember these 3 key ideas for your startup:
Transparency is Key: Always ensure that all fees and terms in your subscription models are clearly disclosed upfront. Hiding important information can lead to legal troubles and loss of consumer trust.
User-Friendly Cancellation Processes: Design your cancellation processes to be straightforward and user-friendly. Over-complicating this can severely affect your brand's reputation and customer loyalty.
Consumer Protection Laws: Familiarize yourself with consumer protection laws like the Restore Online Shoppers’ Confidence Act to avoid potential violations and subsequent penalties.
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