US Sues Adobe, Executives over SaaS Cancellation Policies

The Federal Trade Commission (FTC) on Monday announced the Department of Justice (DOJ) is suing software maker Adobe along with two of its executives, alleging the company deceived customers with a hidden early termination fee and saying subscriptions are overly difficult to cancel.

The FTC referred complaints to the DOJ, which filed a federal court complaint in the US District Court in California. The lawsuit charges, among other things, that Adobe pushed consumers toward an “annual paid monthly” subscription -- without adequately disclosing cancelation within the first year could cost hundreds of dollars. The lawsuit also names Maninder Sawhney, an Adobe senior vice president, and David Wadhwani, president of Adobe’s digital media business.

“Adobe trapped customers into year-long subscriptions though hidden early termination fees and numerous cancellation hurdles,” said Samuel Levine, director of the FTC Bureau of Consumer Protection, in a statement.

The DOJ complaint charges that Adobe’s subscription practices violate the Restore Online Shoppers’ Confidence Act, which was signed into law in 2010.

Adobe moved to a subscription model for its multi-media production software in 2012, requiring consumers to pay for access on a recurring basis, effectively moving to a software-as-a-service (SaaS) business model as its main revenue source.  

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The DOJ says consumers complained to the Better Business Bureau and the FTC about Adobe’s early termination fee (ETF), which the lawsuit says the company buries in small print. The ETF amounts to 50 percent of the remaining monthly payments when a customer cancels in their first year.

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

The complaint alleges Adobe uses the ETF to pressure consumers into not canceling their subscription. “When consumers reach out to Adobe’s customer service to cancel, they encounter resistance and delay from Adobe representatives,” according to the FTC’s press release.

Adobe’s subscription service has been extremely successful. The company posted record revenue of $5.18 billion in the first quarter of 2024, representing 11 percent year-over-year growth. Adobe increased its “annual billed monthly” Creative Cloud plans in 2023, charging $22.99 per month for a single app and 59.99 per month for its “All Apps” plan. The company at year-end 2023 boasted a user base of 33 million subscribers.

InformationWeek has contacted Adobe for comment and will update with any response.