The Federal Trade Commission (FTC) is suing Adobe over its policy of charging customers a fee to cancel their paid Creative Cloud subscription early. The full lawsuit includes a quote from a company executive calling the cancellation fee an addiction for Adobe and acknowledging that there is no way to cancel or better disclose the subscription without causing “a major blow to the business.” Adobe disagrees.
Image source: adobe.com
Comments on this issue were given to the resource The Verge Adobe General Counsel and Chief Trust Officer Dana Rao rejected both the employee’s quote and the validity of the FTC’s complaint, saying he was “disappointed in the way they are trying to take non-executive employees’ comments from years past out of context to make a point.” The employee, Rao assured, is not on the executive team that reports directly to CEO Shantanu Narayen, and charging early termination fees “was not their decision.” The fees represent “less than half a percent of our annual revenue,” and they “do not drive our business, <..> do not drive our business decisions.”
The FTC’s lawsuit alleges that Adobe fails to clearly and conspicuously disclose the early termination fee for its Creative Cloud subscription or provide an easy process for canceling it. The fee applies to an annual plan that is paid monthly, and the cancellation fee is not disclosed anywhere on the checkout screen. The plan is priced lower than the monthly plan because it is effectively a discounted annual plan, and is the default on the checkout screen. As a result, consumers are locked into the “standard, best-value subscription plan,” but some important terms are not disclosed, the FTC concludes.
An annual plan with monthly payment is selected by default when subscribing, the amount of the fee for its cancellation is not specified
In May 2022, Forrester Research wrote a report that found most consumers were trying to figure out how much they would have to pay to cancel a subscription, and that Adobe’s leadership had discussed it, the lawsuit says. Rao rejected that point, too, saying the company began reviewing its subscription practices in October 2021, and that discussion of the Forrester report simply confirmed that idea. The mechanism changed in June 2023. “You can cancel in 30 seconds if you want — it’s an industry-leading, four-step cancellation process,” Rao said.
When asked why the company didn’t list the cancellation fee on the subscription page, he said it would be difficult to display because it’s 50% of the customer’s remaining term. And listing all the details on one page would result in “a very cluttered user interface that would be even more confusing for the consumer with so many fields to check.”
In its lawsuit, the FTC cites the Restoring Online Shopper Confidence Act (ROSCA), which requires online retailers to “clearly and conspicuously disclose all material terms of a transaction” before receiving a consumer’s payment information and to provide “simple mechanisms for a consumer to cancel recurring charges on the consumer’s card.” Previously, only the FTC could decide what “clearly and conspicuously” meant in this case, but a recent precedent was set in the U.S. Supreme Court that gave Adobe the right to explain its own understanding of these terms to the court. This will likely be the corporation’s defense strategy in the lawsuit with the FTC.
If you notice an error, select it with your mouse and press CTRL+ENTER.
