US sues Adobe over hard-to-cancel subscriptions

U.S. regulators sued Adobe on Monday, accusing the company of making it difficult to cancel subscriptions to Photoshop and other software, as they step up their crackdown on such practices.

The Justice Department said in its lawsuit that Adobe hid details of its steep cancellation fees in small print and behind optional text boxes and hyperlinks. Adobe's website and customer service representatives made it even more difficult to cancel, the lawsuit alleged.

In its lawsuit, filed in the U.S. District Court for the Northern District of California, the government said Adobe is aware of the obstacles consumers face when trying to cancel their subscriptions.

The lawsuit follows a similar one filed by the Federal Trade Commission against Amazon last year, in which the government alleged the e-commerce giant made it difficult for customers to cancel their Prime memberships. The commission has proposed new click-to-cancel rules, which would require companies to offer an easy way to stop paying for products.

The new effort to penalize companies that offer subscriptions that are hard to cancel falls under a broader effort by federal regulators to rein in the power of big tech companies. The Justice Department and FTC have filed antitrust lawsuits against Google, Amazon, Apple, Microsoft and Meta, the owner of Instagram and WhatsApp, alleging that their conduct and deals stifle competition. Adobe last year abandoned plans to buy design startup Figma for $20 billion after facing resistance from regulators around the world.

In its lawsuit against Adobe, the Justice Department named as defendants David Wadhwani, president of the company's digital media business, and Maninder Sawhney, a vice president of the company. The lawsuit follows an investigation by the FTC into Adobe's practices.

“Adobe general counsel Dana Rao said in a statement, “We are transparent about our subscription terms and make the cancellation process simple, and we will defend against the FTC's claims in court.”

Wadhwani and Sawhney did not immediately respond to requests for comment.

Monday's lawsuit targets Adobe's popular suite of design software, including Photoshop, Illustrator and Acrobat. In recent years, Adobe has switched to subscription offerings for those products, abandoning the traditional model of selling a one-time license to use its tools.

The company expects subscription revenue to reach $14.22 billion in 2023, up from $7.71 billion in 2019, the government said.

According to the complaint, Adobe took steps to lock consumers into annual subscriptions that were charged in monthly increments. The total price of the plans was often displayed in bold when customers signed up. But references to Adobe's cancellation fees were displayed in light italics, the government said.

According to the government, consumers had to click on a separate link to find out more about the early termination fee, which is half the remaining payment and applies if customers cancel within a year.

Consumers can sign up for a subscription without clicking the link, and Adobe knows most consumers won't click the link before signing up, the complaint says.

The government said customers complained about the cancellation fees to Adobe and the Better Business Bureau.

Customers who tried to cancel had difficulty finding cancellation options on Adobe's website, and the company's customer service line frequently had dropped calls or passed customers around from one agent to another, according to the lawsuit.

The government said that in many cases, subscribers who requested cancellations through Adobe's customer service continued to be charged even though they thought they had successfully canceled. Some subscribers were unaware that Adobe was continuing to charge them for months, only finding out about the charges when they checked their financial accounts.

Most of the allegations in the case against individual executives have been sealed. The government has said Wadhwani was critical to Adobe's subscription business.

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