The Photoshop maker's revenue doubled following its shift to a subscription model
The U.S. government has filed a complaint in federal court claiming that Adobe $ADBE is hurting consumers by not adequately disclosing high early-termination fees for its “annual paid monthly” subscription, allegedly in violation of the Restore Online Shoppers’ Confidence Act.
The Department of Justice acted upon referral from the Federal Trade Commission, citing consumer complaints to the commission and the Better Business Bureau. Some customers said they were not aware of the termination fee, while others complained that the only way to avoid the fine was to continue paying for their subscription for a year.
According to the complaint, Adobe pre-selects its year-long monthly plan as the default and prominently displays its cost, but only discloses the termination fee, amounting to 50% of the remaining monthly payments for the first year, in small print or by using icons. “Despite being aware of consumers’ problems with the early termination fee, the company continues its practice of steering consumers to the annual paid monthly plan while obscuring the early termination fee,” the FTC said in a statement that accused Adobe of “deceiving consumers by hiding the early termination fee for its most popular subscription plan.”
The complaint also alleges that Adobe purposefully makes it difficult for consumers to cancel their subscription by forcing them to navigate through multiple web pages and having customer service representatives engage in delay tactics, including multiple call or chat 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 FTC said.
The complaint also individually names Adobe executives Maninder Sawhney and David Wadhwani, alleging that they had authority over the practices outlined by the FTC.
The complaint notes that since shifting to a subscription model in 2012, Adobe’s subscription revenue has doubled in recent years, from $7.71 billion in 2019 to $14.22 billion in 2023, out of a total of $19.41 billion in total revenue.
The complaint calls Wadhwani the “chief architect” of Adobe’s shift to its “current digital subscription model based on maximizing recurring revenues.”
In recent weeks, Adobe has also faced criticism for confusing changes to its terms and conditions that prompted concerns from users that their work could be used to train its artificial intelligence products.
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