The US Justice Department, together with the Federal Trade Commission (FTC), are suing Adobe Inc. (and two Adobe executives) over an alleged hidden “Early Termination Fee” and an alleged overly complex subscription-cancellation process.
Hiding Important Information
In the complaint, filed in the U.S. District Court for the Northern District of California, it’s alleged that Adobe Inc systematically violated the Restore Online Shoppers’ Confidence Act (ROSCA) using fine print and inconspicuous hyperlinks to hide important information about Adobe’s subscription plans.
Using An Early Termination Fee As A Retention Tool?
Allegedly, these violations include a significant “Early Termination Fee” that customers may be charged when they cancel their subscriptions, which Adobe may have profited from. The complainant says that this may amount to misleading Adobe’s consumers about the true costs of a subscription and “ambushing” them with the fee when they try to cancel, i.e. using the fee as a powerful retention tool.
Deterred From Cancellation By The Complexity Of The Process?
The Justice Department / FTC complaint alleges that Adobe has also been violating ROSCA by not providing consumers with a simple mechanism to cancel their recurring, online subscriptions. Instead, it’s alleged, Adobe protects its subscription revenues by “thwarting subscribers’ attempts to cancel” and by “subjecting them to a convoluted and inefficient cancellation process filled with unnecessary steps, delays, unsolicited offers, and warnings”. It’s alleged, therefore, that the complexity of the cancellation process appears to be used to deter customers from cancelling (another retention tool).
Trapping Customers
The Director of the FTC’s Bureau of Consumer Protection, Samuel Levine, summed up the complaint against Adobe, saying “Adobe trapped customers into year-long subscriptions through hidden early termination fees and numerous cancellation hurdles,” and that “Americans are tired of companies hiding the ball during subscription signup and then putting up roadblocks when they try to cancel”.
Responsibility
U.S. Attorney Ismail J. Ramsey for the Northern District of California highlighted how “Companies that sell goods and services on the internet have a responsibility to clearly and prominently disclose material information to consumers”. He added that “It is essential that companies meet that responsibility to ensure a healthy and fair marketplace for all participants. Those that fail to do so, and instead take advantage of consumers’ confusion and vulnerability for their own profit, will be held accountable.”
Principal Deputy Assistant Attorney General Brian M. Boynton (head of the Justice Department’s Civil Division) also highlighted the importance of stopping “companies and their executives from preying on consumers who sign up for online subscriptions by hiding key terms and making cancellation an obstacle course”.
What Does Adobe Say?
In a statement on Adobe’s website, in answer to the allegations in the lawsuit, Adobe’s general counsel and chief trust officer Dana Rao denies the FTC’s claims and says Adobe will contest the charges in court.
Mr Rao says: “Subscription services are convenient, flexible and cost effective to allow users to choose the plan that best fits their needs, timeline and budget. Our priority is to always ensure our customers have a positive experience. We are transparent with the terms and conditions of our subscription agreements and have a simple cancellation process. We will refute the FTC’s claims in court.”
Penalties
The lawsuit seeks unspecified amounts of consumer redress and monetary civil penalties from the defendants, as well as a permanent injunction to prohibit them from engaging in future violations.
Not The Only Ones
Adobe is, of course, not the only big tech company to have attracted the attention of the US Federal Trade Commission (FTC) in recent times. For example, earlier this month, the FTC filed a lawsuit against Amazon for allegedly enrolling customers in its Prime subscription service without their consent and making it difficult to cancel the subscription. The FTC accused Amazon of using “dark patterns” to mislead customers and hinder their attempts to unsubscribe easily
What Does This Mean For Your Business?
The lawsuit against Adobe should be an important reminder for businesses about the importance of transparency and simplicity in subscription services. The allegations against Adobe highlight the potential risks and legal repercussions of not clearly disclosing all terms and conditions associated with subscription plans. UK businesses offering similar services must ensure that all subscription-related fees, particularly early termination fees, are clearly communicated to customers upfront to avoid misleading them.
The complexity of the cancellation process is another significant issue raised in the Adobe case. Businesses must create a straightforward and user-friendly cancellation process. Any attempt to complicate this process could be viewed as a strategy to retain customers unfairly, which could lead to legal challenges. Also, ensuring that customers can easily unsubscribe from services not only builds trust but also complies with consumer protection laws.
The involvement of two high-level executives in the Adobe lawsuit (David Wadhwani and Maninder Sawhney) highlights the accountability at all levels of an organisation. Business leaders should, therefore, be vigilant and ensure their company’s practices are transparent and compliant with regulations. This includes regularly reviewing and updating terms of service and cancellation policies to meet legal standards and customer expectations.
For UK businesses, this case also signals the increasing scrutiny from regulatory bodies worldwide, including the UK’s Competition and Markets Authority (CMA), which has similar oversight on consumer rights and business practices. Staying informed about both local and international regulations and aligning business practices accordingly can prevent potential legal issues.
The Adobe lawsuit, therefore, illustrates the crucial need for businesses to be transparent, honest, and straightforward in their dealings with customers. By adopting clear communication, simplifying processes, and ensuring compliance, UK businesses can foster better customer relationships and avoid costly legal disputes.