Eliminating cancellation fees would be a ‘big blow to business’ for Adobe, one executive admits

The US Federal Trade Commission (FTC) is suing Adobe over the fact that the latter charges customers a fee for early termination of a paid Creative Cloud subscription. The full lawsuit includes a quote from one of the company’s executives, in which he called the cancellation fee a crippling addiction for Adobe and admitted that there was no way to cancel or better disclose it without causing a “big blow to the business.” Adobe disagrees with this.

Image source: adobe.com

Adobe General Counsel and Chief Trust Officer Dana Rao commented on this issue to The Verge, rejecting both the employee’s quote and the validity of the FTC’s lawsuit, saying he was “disappointed in the way they are trying to take comments from non-executive employees out of context for past years to prove my point.” This person, Rao assured, is not part of the management team reporting directly to CEO Shantanu Narayen, and charging early termination fees “was not their decision.” Revenue from this represents “less than half a percent of our annual revenue” and it “does not drive our business, does not drive our business decisions.”

The FTC’s complaint states that Adobe has not clearly and conspicuously disclosed early termination fees for Creative Cloud subscriptions and has not provided a simple process for canceling them. This measure applies to a plan with an annual subscription and monthly payment, and the cancellation fee information is not disclosed anywhere on the checkout screen. This plan has a lower price than the monthly subscription because it is actually a discounted annual plan and is selected by default on the order screen. As a result, the consumer is involved in a “standard, most profitable subscription plan,” but some important terms are not disclosed, the regulator concludes.

An annual tariff with monthly payment is selected by default when registering a subscription; the amount of the cancellation fee is not specified

In May 2022, Forrester Research prepared a report in which it indicated that most consumers were trying to determine how much they would have to pay when canceling a subscription, and Adobe management discussed this, the lawsuit says. Rao also rejected this thesis, saying that the company began reviewing its subscription practices in October 2021, and when discussing the Forrester report, this idea was simply confirmed. The mechanism was changed in June 2023. “You can cancel in 30 seconds if you want—it’s a four-step, industry-leading cancellation process,” says Mr. Rao.

When asked why the company did not indicate the cancellation fee on the subscription page, he replied that it would be difficult to display it, since it is 50% of the fee for the remaining term for the client. And putting all the details on one page would result in “a very cluttered user interface that will be even more confusing for the consumer with a large number of fields to check.”

In the complaint, 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 to allow a consumer to turn off regular payments from a consumer card.” Previously, only the FTC could decide what “clear and conspicuous” meant in this case, but recently a precedent was created in the US Supreme Court that gave Adobe the right to justify its understanding of these terms to the court. This, apparently, will be the strategy for defending the corporation in litigation with the FTC.