Adobe is currently under investigation by the Federal Trade Commission for its allegedly complex subscription cancellation policies. According to a recent report by TechCrunch, this scrutiny could potentially lead to significant financial repercussions for the company.
In a recent filing with the Securities and Exchange Commission, Adobe disclosed that it has been cooperating with the FTC since June 2022. The investigation focuses on Adobe’s compliance with the Restore Online Shoppers’ Confidence Act, which mandates straightforward and user-friendly processes for online subscription cancellations.
Challenging cancellation process under investigation
The Act stipulates several requirements for service providers, including a straightforward cancellation process without prolonged procedures, immediate account cancellation upon request, prompt adherence to refund or cancellation policies, and the provision of cancellation options consistent with the method of subscription (e.g., allowing online cancellation if the subscription was made online). Additionally, the Act requires sellers to seek consent before presenting new offers to customers attempting to cancel and to send annual reminders for automatic subscription renewals.
Adobe has faced criticism for its cancellation process, with reports of mandatory phone calls for cancellation and the imposition of early termination fees, practices that deter customers from canceling their subscriptions.
In November 2023, the FTC indicated its authority to negotiate a settlement regarding the investigation. While Adobe maintains that its practices are lawful and is currently in discussions with FTC staff, the company acknowledges the potential for a “material impact on our financial results and operations” if it has to defend its practices or pay fines.
This investigation is part of the FTC’s broader initiative to ensure fair practices in online subscriptions and memberships. In March, the FTC proposed a “Click to Cancel” rule, aiming to make subscription cancellations as easy as the sign-up process. This proposal is an extension of the FTC’s review of its 1973 Negative Option Rule, which targets unfair or deceptive practices in recurring payment programs.
The FTC’s action against Adobe follows a similar move against Amazon in June, where the e-commerce giant was sued for allegedly violating the Restore Online Shoppers’ Confidence Act by using “dark patterns” to encourage automatic Prime subscription renewals.
