FTC goes after Adobe over early termination fee and making it hard to cancel

The Federal Trade Commission is investigating Adobe's cancellation policy after complaints that it hides its early termination fee - ConsumerAffairs

One Adobe customer demonstrates how the game is played

It's taken a year, but the U.S. Federal Trade Commission (FTC )is starting to scrutinize companies that make it difficult for consumers to cancel services. The latest company to get a wake-up call? Adobe.

Adobe and two of its executives are under investigation by the FTC for alledgedly deceiving consumers by hiding the early termination fee for its most popular subscription plan and making it difficult for consumers to cancel.

According to a federal court complaint filed by the Department of Justice after being notified and referred by the FTC, Adobe pushed consumers toward the "annual paid monthly" subscription without adequately disclosing the cost of canceling it in the first year.

“Adobe trapped customers into year-long subscriptions through hidden early termination fees and numerous cancellation hurdles,” said Samuel Levine, director of the FTC’s Bureau of Consumer Protection. “Americans are tired of companies hiding the ball during subscription signup and then putting up roadblocks when they try to cancel. The FTC will continue working to protect Americans from these illegal business practices.”

Adobe's core customers are digital entrepreneurs – people whose livelihood is making money creating things like videos, graphics, etc. After years of selling software, Adobe got wise and, in 2012, shifted principally to a subscription model, requiring consumers to pay for access to the company’s popular software on a recurring basis.

Doing that was good for business, too. According to one report, subscriptions account for 95% of the company’s revenue. For the quarter ended March 1, subscription revenue totaled $4.92 billion.

Adobe 'pushes' subscribers to sign up for the yearly plan

The complaint alleges that when consumers purchase a subscription through Adobe's website, it automatically selects the "annual paid monthly" subscription plan. During enrollment, Adobe prominently displays the plan's "monthly" cost, but hides the early termination fee (ETF) and its amount, which is 50% of the remaining monthly payments when a consumer cancels in the first year. 

This issue is similar to what the Consumer Financial Protection Bureau (CFPB) is doing in regards to fine print, in that when ConsumerAffairs took a look at Adobe’s subscription page, the “early termination fee” is not in plain sight, but rather it requires hovering over small icons (like the “i” with a circle around it icon) to get a pop-up about the ETF. Even at that, it does not disclose what the fee is. 

The process is such a can of worms that one Adobe subscriber took to YouTube to show other consumers where the cancellation fee land mines are:

The 'roach motel'

In addition to failing to disclose the ETF to consumers when they subscribe, the complaint also added another layer to its complaint: that Adobe uses the ETF to ambush consumers to deter them from cancelling their subscriptions.

When the complaint peeled back that layer of the onion, it also alleges that Adobe’s cancellation processes are designed to make cancellation difficult for consumers. Difficult, as in being forced to navigate numerous pages in order to cancel. It's sort of like that vintage "Roach Motel" ad for Black Flag bug repellant where it's easy to get in, but impossible to get out.

"When consumers reach out to Adobe’s customer service to cancel, they encounter resistance and delay from Adobe representatives," is how the FTC explained what it found.

"Consumers also experience other obstacles, such as dropped calls and chats, and multiple 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."

ConsumerAffairs reached out to Adobe to ask for information about the EFT complaint and its comments on the lawsuit, but did not hear back from the company.

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