A new lawsuit filed by the U.S. Department of Justice is taking aim at software developer Adobe over alleged consumer protection violations related to the subscription model it uses to sell access to its products.
The suit, filed Monday in the Northern District of California, alleges that Adobe deceived subscribers to its “annual paid monthly” payment plan by “hiding” early termination fees that can amount to hundreds of dollars and throwing further “onerous and complicated” roadblocks in front of customers wishing to cancel their subscription. That process includes “resistance and delays from Adobe [customer service] representatives” and being “forced to navigate numerous pages in order to cancel.”
“Adobe trapped customers into year-long subscriptions through hidden early termination fees and numerous cancellation hurdles,” Federal Trade Commission Bureau of Consumer Protection Director Samuel Levine said in a statement. “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.”
The complaint further claims that Adobe “pushes” its “annual paid monthly” as the primary, default subscription choice to customers while obscuring that an early termination fee amounting to 50% of remaining monthly payments is charged should they cancel their subscription in the first year. It also charges that Adobe “ambushes” customers with early termination fees during the cancellation process as a tool to deter customers from canceling subscriptions.
“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,” read an FTC statement.
The suit alleges that these practices violate the Restore Online Shoppers’ Confidence Act, which outlines protections against charges from online sellers without their informed consent. Adobe Senior Vice President of Digital Media, Digital GTM & Sales Maninder Sawhney and President of Digital Media Business David Wahdwani are also named as defendants.
The DOJ’s allegations could cause some worry for Adobe as its subscription business is the key revenue generator for the company since switching to the subscription model in 2012. The company stated that subscriptions to Adobe products, including Photoshop and Premiere, accounted for 95% of its total revenue in the quarter ending on March 1, 2024.
Adobe’s stock price surged last week following the release of that quarterly earnings statement, jumping up by 15%. Trading on Monday following the complaint’s filing shows a loss of roughly 1.5%.
Adobe has not commented publicly on the filing.