FTC Sues Adobe Over Hidden Fees, Termination ‘Resistance’

The US Federal Trade Commission sued Photoshop and Acrobat maker Adobe on Monday, alleging the company concealed high termination fees from customers of its most popular subscription plan and used an array of tactics to make it intentionally difficult for users to cancel.

Adobe steered customers toward its “annual paid monthly” subscription option without clearly disclosing cancellation fees that could rise into the hundreds of dollars, the FTC alleged in the lawsuit in San Jose federal court.

“Adobe trapped customers into year-long subscriptions through hidden early termination fees and numerous cancellation hurdles,” said FTC consumer protection bureau director Samuel Levine.

“Americans are tired of companies hiding the ball during subscription signup and then putting up roadblocks when they try to cancel.”

‘Resistance and delay’

The suit alleges Adobe hid the termination fees in fine print or behind textboxes and hyperlinks.

The termination fees are calculated as 50 percent of the remaining payments when customers terminate in their first year, the complaint alleges.

Subscribers who want to cancel online must navigate onerously through numerous pages, while others experience dropped calls or chats or are forwarded through multiple representatives and encounter “resistance and delay” from those representatives, the FTC said.

The hidden fees were used as a pressure tactic when customers tried to cancel, the lawsuit said, noting that some customers continued to be charged when they thought they had cancelled.

The lawsuit names two Adobe executives as co-defendants: president of the digital media business David Wadhwani and Maninder Sawhney, a senior vice president in digital sales.

‘Transparent’

Adobe general counsel Dana Rao said the FTC’s claims were baseless.

“We are transparent with the terms and conditions of our subscription agreements and have a simple cancellation process,” he said.

Adobe controversially switched to a subscription-only plan for its Photoshop and other products in 2012.

Subscriptions accounted for 95 percent of the company’s $5.18 billion (£4bn) in revenue in its most recent quarter.

The company sells subscriptions on a monthly, “annual, paid monthly” and prepaid annual basis.

Adobe last year abandoned a $20bn acquisition of smaller rival Figma after regulators questioned the deal on competition grounds.

Matthew Broersma

Matt Broersma is a long standing tech freelance, who has worked for Ziff-Davis, ZDnet and other leading publications

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