US Government sues Adobe over concealed termination fees

The US government accuses the software company Adobe Inc.of misleading consumers about significant termination penalties in its well-liked subscription plans and making it more difficult to terminate subscriptions. The government filed a lawsuit against Adobe Inc. on Monday.

FTC details hidden charges in the complaint

The Federal Trade Commission (FTC) claimed in a complaint filed with a federal court in San Jose, California, that Adobe hides important terms and expensive termination fees, which can amount to hundreds of dollars, in the fine print of its "annual paid monthly" subscription plan, sometimes even behind textboxes and hyperlinks. When customers cancel within the first year of their subscription, Adobe calculates early termination penalties as 50 per cent of the remaining payments, according to the FTC.

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Obstructive cancellation practices alleged

The FTC also charged Adobe with unduly complicating the process of cancelling a subscription. If customers want to cancel over the phone, they frequently experience "resistance and delay" from the staff, must repeat their demands to many personnel, and must browse through multiple pages. Additionally mentioned as defendants in the lawsuit are two Adobe executives: Maninder Sawhney, senior vice president in digital sales, and David Wadhwani, president of digital media business.

Samuel Levine, director of the FTC Consumer Protection Bureau, stated that "Adobe trapped customers into year-long subscriptions through hidden early termination fees and numerous cancellation hurdles. Americans are tired of companies hiding the ball during subscription signup and then making roadblocks when they try to cancel."

Adobe vows to contest the claims

In response to the accusations, Adobe's general counsel and chief trust officer, Dana Rao, said that the San Jose-based business will contest the FTC's charges in court. "Subscription services are convenient, flexible, and cost-effective, allowing users to choose the plan that best fits their needs, timeline, and budget," Rao stated. "We are transparent with the terms and conditions of our subscription agreements and have a simple cancellation process."

Significant revenue from subscriptions

A significant source of income for Adobe is its subscription business, which generated $4.92 billion, or 95 per cent, of the company's $5.18 billion in sales for the quarter that ended on March 1.

Violation of Federal Law alleged

Adobe is being accused by the Federal Trade Commission (FTC) of breaking the Restore Online Shoppers’ Confidence Act of 2010, a federal legislation passed in 2010 that forbids merchants from charging for anything, including automatic subscription renewals, provided they acquire the informed agreement of their customers and explicitly disclose any material terms.

(With inputs from Agencies)