FTC says Adobe hid key terms of “annual paid monthly” subscription plan and set up roadblocks to deter customer cancellations

Given the injury and irritation inflicted on consumers by buried terms, hidden charges, and complicated cancellation procedures, it’s no wonder they’re called “negative” options. A federal court complaint the Department of Justice filed upon notification and referral from the FTC alleges that Adobe and corporate executives Maninder Sawhney and David Wadhwani have hidden fees associated with the company’s most popular subscription plan and made it hard for consumers to cancel. It’s the latest action challenging allegedly illegal conduct in the subscription space. 

The complaint charges that Adobe steers consumers toward its “annual paid monthly” subscription plan, pre-selecting it as a default and displaying the “monthly” cost in the enrollment process. But according to the complaint, Adobe doesn’t clearly disclose key conditions – for example, that cancelling the plan in the first year will result in an “Early Termination Fee.” In fact, if consumers cancel during that period, Adobe charges them 50% of the remaining payments for that one-year term, which could total hundreds of dollars. What’s more, the complaint alleges that on Adobe’s website, the company has buried that information in fine print or requires people to hover over small icons to find the disclosures. 

Did the resulting consumer confusion about the terms of the transaction come as a surprise to Adobe? No. According to the complaint, Adobe has known about it. 

How Adobe buries the details of the deal is only part of the story of how consumers are allegedly injured by the company’s practices. The lawsuit also charges that Adobe designed its procedures to make it difficult for consumers to cancel and even uses the Early Termination Fee as a way to deter them from stopping their subscriptions.

When consumers have tried to cancel on the company’s website, they’re taken through an obstacle course of screens and clicks. When consumers try to cancel by contacting an Adobe customer service representative, they face other roadblocks and resistance – for example, dropped calls, interrupted chats, and multiple transfers. According to the complaint, some people who thought they had successfully cancelled their subscription report that it wasn’t until they checked their credit card statement that they learned Adobe had continued to charge them. 

Count I of the complaint alleges that Adobe, President of the company’s digital media business Wadhwani, and Adobe Vice President Sawhney violated the Restore Online Shoppers’ Confidence Act (ROSCA) and the FTC Act by failing to clearly and conspicuously disclose material terms of the transaction – for example, the subscription’s billing and renewal terms, the length of the subscription, how and when cancellation fees will apply, and the amount of those fees – before getting the consumer’s billing information. According to Count II, Adobe, Wadhwani, and Sawhney violated ROSCA and the FTC Act by failing to get the consumer’s express informed consent before charging their credit card, debit card, or other account. Count III of the complaint – which names Adobe – alleges that the company failed to provide “simple mechanisms” for a consumer to stop recurring charges on credit card, debit card, or other account, in violation of ROSCA and the FTC Act.

The action is pending in a California federal court. If your company uses a subscription model, the filing of the lawsuit should signal to you that the FTC is continuing the fight against buried terms and conditions, hidden fees, and convoluted cancellation procedures.