The Federal Trade Commission (FTC) has filed a lawsuit against Adobe, accusing the company of charging customers an unclear fee for canceling their paid Creative Cloud subscription early. This fee applies to annual plans billed monthly and is not disclosed on the checkout screen, according to the FTC. The commission alleges that Adobe’s practices violate the “Restore Online Shopper Confidence Act” (ROSCA), which mandates clear disclosure of material terms and simple cancellation mechanisms.
Adobe’s Response to the Lawsuit
Adobe firmly disagrees with the FTC’s claims. Dana Rao, Adobe’s General Counsel and Chief Trust Officer, stated that the company is “disappointed” by the lawsuit and the FTC’s use of non-executive comments from past years to support its case. Rao emphasized that the employee quoted in the lawsuit is not part of the executive team reporting to CEO Shantanu Narayen. He also highlighted that the early termination fee contributes “less than half a percent” of Adobe’s annual revenue and does not influence its business decisions.
Adobe argues that it began reviewing its subscription practices in October 2021 and updated its cancellation process by June 2023. Rao stated that customers can now cancel their subscription in “an industry-leading four-step cancellation process” that takes 30 seconds.
Disputed Fee Disclosure
The FTC claims Adobe has failed to adequately disclose the early termination fee, which amounts to 50% of the remaining subscription cost. The fee applies to annual plans with a discounted monthly rate, which is the default option during checkout. According to the FTC, this lack of transparency locks consumers into a “standard, best-value subscription plan” without clear knowledge of the cancellation terms.
Rao defended Adobe’s decision not to display the fee prominently on the subscription page, arguing that including all details would create a “cluttered user interface” and potentially confuse consumers. However, the FTC insists that the terms must be clearly disclosed before payment is collected, as per ROSCA requirements.
Adobe’s defense strategy may hinge on a recent U.S. Supreme Court precedent allowing companies to justify their interpretation of what constitutes “clear and conspicuous” disclosure, notes NIX Solutions. This precedent could shape the outcome of Adobe’s legal battle with the FTC.
As the case unfolds, we’ll keep you updated on developments regarding Adobe’s subscription policies and their compliance with federal regulations.