Adobe to Pay $150 Million to Resolve Federal Claims Over Hidden Subscription Termination Fees
Adobe has agreed to a $150 million settlement with the Justice Department to resolve allegations that the company concealed subscription termination fees and made it difficult for consumers to cancel their plans.
Adobe, based in San Jose, California, is one of the world’s largest software companies and the developer of programs such as Photoshop, Acrobat, and Premiere Pro used across the design, media, and business industries. Much of its software is now delivered through subscription services on its Creative Cloud platform.
The lawsuit centers on Adobe’s “annual paid monthly” plan, a subscription option offered through its Creative Cloud services. Regulators claim that many subscribers did not realize that canceling before the end of the first year could trigger a substantial termination charge. According to court filings, Adobe calculated that fee as roughly half of the remaining payments owed under the contract.
Regulators claim that consumers attempting to cancel their subscriptions encountered significant obstacles. Court filings state that people trying to cancel online had to move through multiple confirmation screens and prompts before completing the request. Those who attempted to cancel by phone were allegedly transferred between representatives and experienced delays before the cancellation could be finalized.
Adobe said it has made changes in recent years to streamline its subscription enrollment and cancellation processes and improve transparency.
Regulators argue that the practices violated the Restore Online Shoppers’ Confidence Act, a consumer protection law enacted by Congress in 2010. The statute governs online subscription programs and automatic renewal services, which have become a central part of many digital business models.
ROSCA requires companies offering online subscriptions to clearly disclose the key terms of an offer before collecting a consumer’s billing information. The law also requires businesses to obtain a customer’s consent to those terms and provide a simple way for subscribers to cancel recurring charges.
The lawsuit was filed in June 2024 by the Justice Department and the Federal Trade Commission in the U.S. District Court for the Northern District of California. The complaint claims Adobe buried key subscription terms in fine print or placed them behind hyperlinks and text boxes that many users might not notice during the enrollment process.
The lawsuit also names two Adobe executives, David Wadhwani, president of the company’s digital media business, and Maninder Sawhney, a senior vice president in digital sales.
Under the settlement, Adobe would be required to clearly disclose any Early Termination Fee before enrolling consumers in a subscription and explain how the fee is calculated. The agreement would also require the company to notify users before a free trial lasting longer than seven days converts into a paid plan that includes such a fee. In addition, Adobe would have to provide subscribers with straightforward ways to cancel their subscriptions.
Adobe said in a statement that it disagrees with the government’s claims but chose to resolve the matter.
