Hunton Retail Law Resource

The FTC is once again taking issue with hidden fees, suing Adobe, Inc., alleging the company and two corporate executives deceived consumers by hiding the early termination fee for a popular subscription plan and making it difficult for consumers to cancel their subscriptions. According to the FTC’s complaint, which was filed in federal court by the Department of Justice, Adobe fails to adequately disclose to consumers that by signing up for Adobe’s “Annual, Paid Monthly” (APM) subscription plan, they are agreeing to a year-long commitment and a significant early termination fee. The complaint alleges that Adobe would typically pre-select by default its APM plan, which, although they are paid month-to-month, locked users into an annual plan. If consumers canceled after a two-week period, they would owe Adobe an early termination fee costing 50% of the consumer’s remaining annual subscriptions. According to the FTC, Adobe hid these material terms in fine print and behind optional textboxes and hyperlinks. The complaint indicates Adobe’s subscription practices have been lucrative and that by 2023, subscription-based revenue accounted for $14.22 billion of Adobe’s $19.41 billion in total annual revenue.

The FTC claims the defendants’ failure to clearly and conspicuously disclose material terms, failure to obtain express informed consent to credit card charges, and failure to provide a simple cancellation mechanism, violate the Restore Online Shoppers’ Confidence Act (ROSCA), 15 U.S.C. § 8404. As we have reported before, ROSCA prohibits charging or attempting to charge consumers for goods or services sold on the Internet through any negative option feature unless the marketer: (1) clearly and conspicuously discloses all material terms of the transaction before obtaining the consumer’s billing information; (2) obtains a consumer’s express informed consent before charging the consumer’s account; and (3) provides simple mechanisms for the consumer to stop recurring charges.

The FTC is seeking a permanent injunction and civil penalties as relief in the case. The case is now pending in federal court in the Northern District of California. US v. Adobe, Inc. et al., No. 5:24-cv-03630 (N.D. Cal. June 17, 2024).