The Biden Administration Expands Its War on Deceptive ‘Subscriptionification’

The DOJ and FTC are targeting Adobe in a strike against companies that make it impossible to quit.

By Yaseen al-Sheikh, More Perfect Union

If you’ve ever been frustrated by a convoluted and expensive process to cancel a subscription, some help may finally be on the way.

The U.S. Department of Justice, in coordination with the Federal Trade Commission, sued software giant Adobe earlier this week for misleading users of their software programs over the terms and conditions of their subscriptions. In the suit, the government accuses the company of harming consumers by “enrolling them in its default, most lucrative subscription plan without clearly disclosing” the huge early termination fees — some of which can quickly catapult beyond hundreds of dollars. 

“Adobe pushed consumers toward the ‘annual paid monthly’ subscription without adequately disclosing that canceling the plan in the first year could cost hundreds of dollars,” the FTC said in a statement. “Adobe prominently shows the plan’s ‘monthly’ cost during enrollment, but it buries the early termination fee (ETF) and its amount, which is 50 percent of the remaining monthly payments when a consumer cancels in their first year.”

Two top Adobe executives, Maninder Sawhney and David Wadhwani, are also named in the lawsuit, though the allegations against them remain sealed, unlike the rest of the complaint.

The suit comes 12 years after Adobe switched from allowing customers to own their software via a single lifetime purchase to requiring monthly or annual subscriptions to access the software. Adobe sells some of the most widely used graphics and video editing software, and was an early adopter of the “subscriptionification” model that’s now pervasive throughout the U.S., even for products like printer cartridges.

As a result of this switch, subscriptions now account for the majority of Adobe’s annual revenue, but the FTC says that Adobe uses misleading language on their sign-up pages to steer users towards the most expensive options that contain concealed junk fees. Adobe compounded the problem with an exceedingly difficult cancellation process that requires customers to navigate multiple website pages and phone calls.

Watch our earlier interview with FTC Chair Lina Khan about banning tough-to-cancel subscriptions:

“Companies that sell goods and services on the internet have a responsibility to clearly and prominently disclose material information to consumers,” U.S. Attorney Ismail J. Ramsey, who filed the complaint in federal court in San Francisco, said in a statement. “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.”

The penalties and fees were discreetly hidden behind the digital version of the small print, with users having to hover over or click on a separate link to see the details and terms of the early cancellation fees. In some cases, users thought they had successfully canceled their plan — only to realize later that they were still being charged as a result of the misleading nature of the cancellation process.

Amazon was sued on very similar grounds one year ago this month, with the FTC alleging that the company was tricking users into signing up for their Prime service and then deliberately making it difficult for them to cancel their subscriptions. Internally, Amazon dubbed their cancelation process “the Iliad Flow” in reference to Homer’s epic about the Trojan War. (The trial over Amazon’s case is set for June 2025.)

Adobe has already been under Biden administration scrutiny for anti-competitive behavior. Late last year, it was forced to abandon a $20 billion planned acquisition of Figma, a design software competitor, after the FTC and European regulators expressed anti-monopoly concerns. Apple, Microsoft, Amazon, and Meta have all also faced antitrust lawsuits from the U.S. government in recent years over allegations that their business practices make it difficult for others to fairly compete.

For now, Adobe’s terms and conditions remain unchanged, and it appears the company aims to keep it that way. In a statement responding to the lawsuit, Adobe chief counsel Dana Rao said that the company is “transparent with the terms and conditions of our subscription agreements and [has] a simple cancellation process.”

"We will refute the FTC's claims in court,” Rao said.