U.S. regulators sued Adobe on Monday over claims that the company made it difficult to cancel subscriptions to Photoshop and other software, an escalation by regulators in a crackdown on such practices.
The Justice Department said in its lawsuit that Adobe hid details of a costly cancellation fee from consumers “in fine print and behind text boxes and optional hyperlinks.” Adobe's website and customer service representatives made the cancellation even more challenging, according to allegations in the lawsuit.
“Adobe is aware of the barriers consumers face when attempting to cancel their subscriptions,” the government said in the lawsuit, which was filed in the U.S. District Court for the Northern District of California.
The challenge follows a similar Federal Trade Commission lawsuit against amazon last year, in which the government argued that the e-commerce giant was making it difficult for customers to cancel their Prime memberships. The agency has proposed new “click to cancel” rules, which would require companies to offer an easy way to stop paying for a product.
New efforts to penalize companies with hard-to-cancel subscriptions build on a broader attempt by federal regulators to rein in the power of Big tech. The Justice Department and the FTC have filed antitrust lawsuits against Google, amazon, Apple, Microsoft and Meta, the owner of instagram and WhatsApp, charging that their behavior or agreements stifle competition. Adobe abandoned a planned $20 billion purchase of Figma, a design startup, when it faced resistance from regulators around the world last year.
In the lawsuit against Adobe, the Justice Department named as defendants David Wadhwani, president of its digital media business, and Maninder Sawhney, the company's vice president. Lawsuit follows an investigation into Adobe's practices by the FTC
“We are transparent with the terms and conditions of our subscription agreements and have a simple cancellation process,” Dana Rao, general counsel at Adobe, said in a statement. “We will refute the FTC's claims in court.”
Wadhwani and Sawhney did not immediately respond to requests for comment.
Monday's lawsuit targets Adobe's popular design software suite, which includes Photoshop, Illustrator and Acrobat. In recent years, Adobe has shifted to offering subscriptions for those products, ditching its previous model of selling one-time licenses to use the tools.
The company earned $14.22 billion in subscription revenue in 2023, up from $7.71 billion in 2019, the government said.
Adobe took steps to lock consumers into annual subscriptions billed in monthly increments, the lawsuit argued. The total price of the plan was often displayed in bold when customers signed up. But a reference to Adobe's cancellation fee appeared in lighter italicized text, the government said.
Consumers had to click on a separate link to see details of the early termination fee, which cost half of the remaining payments and applied if a customer canceled during the first year, the government said.
“Consumers can sign up for subscriptions without clicking that link, and Adobe knows that most consumers do not click on it before signing up,” the lawsuit says.
Customers complained to Adobe and the Better Business Bureau about the cancellation fee, the government said.
If customers tried to cancel, it was difficult to find the option on Adobe's website. According to the lawsuit, the company's customer service line often dropped calls or returned customers between representatives.
“In numerous cases, subscribers who have requested to cancel through Adobe customer service believe they have successfully canceled but continue to be charged,” the government said. “Some of these subscribers are unaware for months that Adobe continues to charge them and only learn of the charges when they review their financial accounts.”
Most of the lawsuit's allegations related to individual executives were sealed. The government said Wadwhani was critical to Adobe's subscription business.
