Adobe reaches $150M settlement in US lawsuit over subscription cancellations
Synopsis
Adobe will pay $150 million to settle a US lawsuit alleging it hid termination fees and made cancelling subscriptions difficult, the Justice Department said.
Adobe has agreed to a $150 million settlement with the US government to resolve allegations that it concealed termination fees and made it difficult for customers to cancel subscriptions, the US Department of Justice said on Friday.
Key highlights
- Adobe agrees to $150 million settlement with US government
- Deal includes $75 million civil penalty and $75 million in customer services
- Lawsuit accused Adobe of hiding termination fees in subscription plans
- Regulators said the company made subscription cancellations difficult
- Settlement still requires court approval
Settlement includes fine and customer compensation
Under the settlement agreement, Adobe will pay a $75 million civil penalty and provide $75 million worth of free services to customers, according to the Justice Department.
The agreement still requires approval from a US court before it becomes final.
Regulators accused Adobe of hiding termination fees
The lawsuit was filed in June 2024 by the Department of Justice and the Federal Trade Commission.
Regulators alleged that Adobe concealed termination fees associated with its “annual paid monthly” subscription plan, which could sometimes amount to hundreds of dollars.
According to the complaint, the fees were often hidden in fine print or behind hyperlinks and text boxes, making them difficult for customers to notice before signing up.
Cancellation process allegedly designed to be difficult
The lawsuit also accused Adobe of creating barriers for customers attempting to cancel their subscriptions.
Customers trying to cancel online were required to navigate multiple pages, while those calling customer service were allegedly forced to repeat their requests to several representatives and face delays and resistance, regulators said.
Authorities said the practices violated the Restore Online Shoppers’ Confidence Act, a 2010 law that requires companies to clearly disclose key subscription terms and obtain customer consent before charging customers.
Settlement also resolves claims against executives
The agreement also resolves government claims against two Adobe executives, though regulators did not disclose further details about those allegations.
Brett Shumate, head of the Justice Department’s civil division, said the case aimed to protect consumer rights.
“American consumers deserve the right to make informed choices when deciding where to spend their hard-earned money,” Shumate said in a statement.
Adobe denies wrongdoing
Adobe said it disagreed with the government’s allegations but agreed to settle the case.
In a statement posted on its website, the company said it has already simplified its subscription sign-up and cancellation processes in recent years to make them more transparent.
“While we disagree with the government’s claims and deny any wrongdoing, we are pleased to resolve this matter,” Adobe said.
Subscriptions dominate Adobe’s revenue
Subscription services account for 97% of Adobe’s revenue, totaling $6.4 billion for the quarter ending February 27, according to company disclosures.
The settlement comes shortly after Adobe announced a leadership change.
Chief Executive Shantanu Narayen said he plans to step down after more than 18 years in the role.
What happens next
The settlement will take effect only after court approval.
Meanwhile, investors continue to watch how artificial intelligence could affect Adobe’s long-term business outlook, a factor that has weighed on the company’s share price this year.
FAQs
Q1: Why is Adobe paying $150 million?
Adobe agreed to the settlement to resolve allegations that it hid subscription termination fees and made cancellations difficult.
Q2: How is the $150 million settlement structured?
The deal includes $75 million in civil penalties and $75 million in free services for customers.
Q3: What law did regulators say Adobe violated?
Authorities said Adobe violated the Restore Online Shoppers’ Confidence Act, which requires clear disclosure of subscription terms.
Q4: Does Adobe admit wrongdoing?
No. Adobe said it disagrees with the allegations and denies wrongdoing, but chose to settle the case.
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