Adobe Sued by FTC for Unfair Selling Practices

18 June 2024
5 minute read

Adobe Sued by FTC for Unfair Selling Practices

18 June 2024
5 minute read

The Federal Trade Commission has announced legal proceedings against Adobe and two of its senior executives for what it claims is misleading and complex terms and activities related to cancellation of software subscriptions.

Section 8403 of ROSCA

The suit relies on section 8403 of ROSCA (Restore Online Shoppers Confidence Act) – specifically that Adobe’s sales process fails to “provide text that clearly and conspicuously discloses all the material terms of the transaction before obtaining the consumer’s billing information”. Furthermore, it also alleges that Adobe fails to “provide simple mechanisms for a consumer to stop recurring charges from being placed on the consumer’s credit card, debit card, bank account, or other financial account”.

Adobe’s sales practices are detailed in the suit, and the complaint focuses primarily on Adobe’s ‘Annual, Paid Monthly’ (APM) purchase option. This is the default option presented to individuals buying Creative Cloud or other subscriptions. It offers a $30 discount over the month-by-month commitment, although paying in full up-front is cheaper still. At face value, these terms don’t appear to be that out of the ordinary. It’s routine for subscription services to offer discounts for long term commitments – e.g. 12 months for the price of 10 – and a fee for credit when paying monthly is also often expected.

However, the FTC claims that the terms for APM are not clearly stated prior to signup and that this breaches ROSCA. Importantly for the suit, Adobe doesn’t clearly state the size of the cancellation fee, only that one is payable. APM terms commit the user to an annual subscription, and should the user wish to cancel within that subscription period, a cancellation fee of 50% of the remaining subscription cost is payable.

For example, if you cancel an APM subscription after six months, the early termination fee will be 3 month’s subscription cost (50% of the remaining term). Importantly, if you do agree to pay the termination fee, you will still lose access to the programs and your data at the end of the current billing month.

To me, this is the biggest issue with Adobe’s selling practices as you effectively end up paying the same for a service for several months that you are now no longer able to use. This is a major disincentive to cancellation. Furthermore, there is no option to avoid auto-renewal of subscriptions. Many subscription services familiar to consumers (including Amazon Prime and streaming platforms) enable advance cancellation of renewal without removing access to services.

What the FTC is seeking

The FTC is seeking:

  • an injunction relating to these sales practices
  • cancellation or reformation of contracts
  • civil penalties against Adobe and the named employees
  • full refunds

The scope of this is substantial as Adobe has been using the alleged sales methods for many years, although it does primarily only affect individual and small business users of Adobe products. Should the suit be successful, we may see other software vendors revising their terms to make them more clear.

Impact for business users

It’s important to note that the alleged unfair practices and cancellation terms only apply to individual and small business purchases of Adobe software.

If you are purchasing via VIP, VIP Marketplace, or an ETLA, then the standard subscription and cancellation terms do not apply to you. Business users either pay upfront in full for the year or pay the same amount monthly pro rata. There is no discount for paying upfront, and these terms primarily exist to aid organisations with cashflow and budgeting. As such, this lawsuit is unlikely to result in material differences for business users.

However, it’s still important to pay close attention to usage of your Adobe subscriptions as you need to notify your reseller (or Adobe if buying direct) of your renewal quantities in advance of your renewal date.

Adobe licensing courses

This is just one topic covered in LISA’s comprehensive Adobe licensing courses, starting with Adobe Licensing Essentials.

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