FTC sues Adobe for allegedly hiding fees, making it tough to cancel subscriptions

The FTC has made several allegations against Adobe regarding its subscription practices. These include:

1. Hiding early termination fees: The FTC claims that Adobe does not adequately disclose early termination fees on its most popular subscription plan. These fees are calculated as 50% of the remaining payments when customers cancel in their first year, and can reach hundreds of dollars.

2. Making cancellation difficult: The FTC alleges that Adobe forces subscribers who want to cancel online to navigate through numerous pages. Those canceling by phone are often disconnected, forced to repeat themselves to multiple representatives, and encounter "resistance and delay" from those representatives.

3. Violating the Restore Online Shoppers’ Confidence Act (ROSCA): The FTC alleges that Adobe, its President of Digital Media business, David Wadhwani, and Adobe Vice President, Maninder Sawhney, violated ROSCA and the FTC Act by failing to clearly and conspicuously disclose material terms of the transaction, such as the subscription's billing and renewal terms, the length of the subscription, how and when cancellation fees will apply, and the amount of those fees, before getting the consumer’s billing information2.

4. Failing to get consumers’ express informed consent: The FTC claims that Adobe, Wadhwani, and Sawhney violated ROSCA and the FTC Act by failing to get the consumer’s express informed consent before charging their credit card, debit card, or other account.

5. Failing to provide simple mechanisms for cancellation: The FTC alleges that Adobe failed to provide “simple mechanisms” for a consumer to stop recurring charges on their credit card, debit card, or other account, in violation of ROSCA and the FTC Act.

These allegations suggest that Adobe's subscription practices may not comply with the law, and the FTC is seeking to hold the company accountable for these practices.

Adobe's business model has undergone a significant transformation since 2012, primarily due to its shift from a traditional software sales model to a subscription-based model. This change has had a profound impact on the company's revenue, customer base, and product offerings.

In 2013, Adobe introduced the Creative Cloud, a subscription-based model that replaced the traditional perpetual license model for its software products, such as Photoshop, Illustrator, and InDesign. This move was aimed at combating piracy and providing regular updates and new features to users, leading to a more consistent revenue stream for Adobe.

The impact of this change on Adobe's revenue was significant. Initially, there was a drop in revenue as the company transitioned from one-time software sales to recurring subscription fees. However, by the end of 2013, Adobe reported over one million subscribers, and by 2017, it had over 12 million. This steady increase in subscribers led to a consistent revenue growth for Adobe, with the company reporting record revenue in 2017.

This shift in business model also expanded Adobe's customer base. By offering more affordable subscription plans, Adobe made its products accessible to a wider audience, including individuals and small businesses that could not afford the high upfront costs of the perpetual license model.

Furthermore, the subscription model allowed Adobe to provide regular updates and new features to its users, improving the overall user experience and ensuring that customers always had access to the latest versions of its software.

In summary, Adobe's business model has changed significantly since 2012, with the company transitioning from a traditional software sales model to a subscription-based model. This shift has led to increased revenue, a broader customer base, and improved user experiences through regular updates and new features.