The Federal Trade Commission is taking action against software maker Adobe and two of its executives, Maninder Sawhney and David Wadhwani, for deceiving consumers by hiding the early termination fee for its most popular subscription plan and making it difficult for consumers to cancel their subscriptions.
A federal court complaint filed by the Department of Justice upon notification and referral from the FTC charges that Adobe pushed consumers toward the “annual paid monthly” subscription without adequately disclosing that cancelling the plan in the first year could cost hundreds of dollars. Wadhwani is the president of Adobe’s digital media business, and Sawhney is an Adobe vice president.
“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.”
After 2012, Adobe shifted principally to a subscription model, requiring consumers to pay for access to the company’s popular software on a recurring basis. Subscriptions account for most of the company’s revenue.
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.
Consumers complain to the FTC and the Better Business Bureau about the ETF, according to the complaint. These consumers report they were not aware of the existence of the ETF or that the “annual paid monthly” plan required their subscription to continue for a year. The complaint notes that Adobe has been aware of consumers’ confusion about the ETF.
Despite being aware of consumers’ problems with the ETF, the company continues its practice of steering consumers to the annual paid monthly plan while obscuring the ETF, according to the complaint.
In addition to failing to disclose the ETF to consumers when they subscribe, the complaint also alleges that Adobe uses the ETF to ambush consumers to deter them from cancelling their subscriptions. The complaint also alleges that Adobe’s cancellation processes are designed to make cancellation difficult for consumers. When consumers have attempted to cancel their subscription on the company’s website, they have been forced to navigate numerous pages in order to cancel.
When consumers reach out to Adobe’s customer service to cancel, they encounter resistance and delay from Adobe representatives. Consumers also experience other obstacles, such as dropped calls and chats, and multiple transfers. Some consumers who thought they had successfully cancelled their subscription reported that the company continued to charge them until discovering the charges on their credit card statements.
The complaint charges that Adobe’s practices violate the Restore Online Shoppers’ Confidence Act.
The Commission vote to refer the civil penalty complaint to the DOJ for filing was 3-0. The Department of Justice filed the complaint in the U.S. District Court for the Northern District of California.
NOTE: The Commission refers a complaint for civil penalties to the DOJ for filing when it has “reason to believe” that the named defendants are violating or are about to violate the law and that a proceeding is in the public interest. The case will be decided by the court.
The staff attorneys on this matter are Sana Chaudhry and Daniel Wilkes of the FTC’s Bureau of Consumer Protection.