The U.S. Federal Trade Commission is investigating Adobe’s subscription cancellation practices
Most of the legal actions taken against big tech companies like Google, Meta, and Apple has taken place in the European Union. (It’s why those, and other big tech companies have been making plans to try and defuse the EU’s legal strategy.) But it would be a mistake to think that U.S. government agencies were not interested in making their own investigations into big tech.
In fact, this past Wednesday, the tech world discovered that the U.S. Federal Trade Commission had been investigating Adobe, the San Jose, Calif.-based software giant that brought you Photoshop, and many other multimedia apps, for more than a year over its the company’s subscription cancellation practices.
According to a report in Bloomberg, that practice has received many complaints from consumers over the years. For instance, the report said that subscribers who didn’t want to cancel within a two-week window of purchasing one of Adobe’s digital subscriptions, such as Adobe Creative Cloud, often had to pay an extra, prorated penalty.
The “Click to Cancel” provision is at the center of the FTC’s investigation of Adobe
What appears to be at the center of the FTC’s investigation of Adobe is the agency’s “ ‘click to cancel’ provision,” which it introduced this past March and requires that sellers make “it as easy for consumers to cancel their enrollment as it was to sign up. That is just one of several significant updates the Commission is proposing to its rules regarding subscriptions and recurring payments. The new click to cancel provision, along with other proposals, would go a long way to rescuing consumers from seemingly never-ending struggles to cancel unwanted subscription payment plans for everything from cosmetics to newspapers to gym memberships.”
The FTC Chair, Lina M. Khan, also said in that March 23, 2023 press release, “Some businesses too often trick consumers into paying for subscriptions they no longer want or didn’t sign up for in the first place.”
Adobe, who stated that it was cooperating with the FTC, made the news public an SEC filing. Here are some significant details from that SEC filing: “Since June 2022, we have been cooperating with the Federal Trade Commission (“FTC”) staff in response to a Civil Investigative Demand seeking information regarding our disclosure and subscription cancellation practices relative to the Restore Online Shoppers’ Confidence Act. In November 2023, the FTC staff asserted that they had the authority to enter into consent negotiations to determine if a settlement regarding their investigation of these issues could be reached. We believe our practices comply with the law and are currently engaging in discussion with FTC staff. The defense or resolution of this matter could involve significant monetary costs or penalties and could have a material impact on our financial results and operations.”
As you can see, in the last two sentences, Adobe does believe that it is complying with the law. But the last sentence of that paragraph underscores how the FTC’s ruling could hurt Adobe: It states that there could be “significant monetary costs or penalties.”
