The US Justice Department, together with the Federal Trade Commission, announced a civil enforcement action against Adobe Inc yesterday (17 June).
The action includes the company and two of its executives: Maninder Sawhney who is senior vice president for digital media, digital GTM and sales; and David Wadhwani, chief business officer for digital media.
The US authorities claim that Adobe has violated the Restore Online Shoppers’ Confidence Act (ROSCA).
“The lawsuit alleges that the defendants imposed a hidden ‘Early Termination Fee’ on millions of online subscribers and that Adobe forced subscribers to navigate a complex and challenging cancellation process designed to deter them from cancelling subscriptions they no longer wanted,” the authorities stated.
The complaint has been filed in the US District Court for the Northern District of California, and also alleges that “for years, Adobe has profited from this hidden fee, misleading consumers about the true costs of a subscription and ambushing them with the fee when they try to cancel, wielding the fee as a powerful retention tool.”
It claimed that Adobe has further violated ROSCA by not providing consumers with a simple mechanism to cancel their recurring, online subscriptions.
“Instead, Adobe allegedly protects its subscription revenues by thwarting subscribers’ attempts to cancel, subjecting them to a convoluted and inefficient cancellation process filled with unnecessary steps, delays, unsolicited offers and warnings.”
Adobe issued a brief statement in response and said it would fight the allegations in court.
Dana Rao, Adobe general counsel and chief trust officer, stated: “Subscription services are convenient, flexible and cost effective to allow users to choose the plan that best fits their needs, timeline and budget.
“Our priority is to always ensure our customers have a positive experience. We are transparent with the terms and conditions of our subscription agreements and have a simple cancellation process. We will refute the FTC’s claims in court.”
In the financial year ending 31 December 2023, Adobe achieved $1.91bn (£1.5bn) in “net new annualised recurring revenue” at its Digital Media business, and $422m growth in Digital Experience subscription revenues.
Total revenue was $19.41bn.
In its most recent quarterly results, for Q2 2024, Adobe also said it was raising its subscription revenue target for this year.
In the UK the government has pledged to update consumer protection laws with measures that include “tackling subscription traps”.
At the end of last year the government cited research that found consumers are estimated to spend more than £570m a year on subscriptions they’ve forgotten about, while a further £382m of unwanted spending is the result of people finding subscriptions too difficult to cancel.
Earlier this month Adobe faced an online backlash over its updated Terms of Use.
