FTC and DOJ file Complaint Against Adobe and Adobe Executives for Alleged Violations

The Justice Department, together with the Federal Trade Commission (FTC), today announced a civil enforcement action against Adobe Inc. and two Adobe executives, Maninder Sawhney and David Wadhwani, for alleged violations of the Restore Online Shoppers’ Confidence Act (ROSCA). The lawsuit alleges that the defendants imposed a hidden “Early Termination Fee” on millions of online subscribers and that Adobe forced subscribers to navigate a complex and challenging cancellation process designed to deter them from cancelling subscriptions they no longer wanted.

Adobe Inc. is a software company that offers online subscriptions to design and productivity software applications via its website, Adobe.com. David Wadhwani is Adobe’s President of Digital Media Business, and Maninder Sawhney is Adobe’s Vice President of Digital Go to Market & Sales.

According to a complaint filed in the U.S. District Court for the Northern District of California, the defendants have systematically violated ROSCA by using fine print and inconspicuous hyperlinks to hide important information about Adobe’s subscription plans, including about a hefty Early Termination Fee that customers may be charged when they cancel their subscriptions. The complaint alleges that for years, Adobe has profited from this hidden fee, misleading consumers about the true costs of a subscription and ambushing them with the fee when they try to cancel, wielding the fee as a powerful retention tool.

The complaint alleges that Adobe has further violated ROSCA by failing to provide consumers with a simple mechanism to cancel their recurring, online subscriptions. Instead, Adobe allegedly protects its subscription revenues by thwarting subscribers’ attempts to cancel, subjecting them to a convoluted and inefficient cancellation process filled with unnecessary steps, delays, unsolicited offers and warnings.

The lawsuit seeks unspecified amounts of consumer redress and monetary civil penalties from the defendants, as well as a permanent injunction to prohibit them from engaging in future violations.

“The Justice Department is committed to stopping companies and their executives from preying on consumers who sign up for online subscriptions by hiding key terms and making cancellation an obstacle course,” said Principal Deputy Assistant Attorney General Brian M. Boynton, head of the Justice Department’s Civil Division. “We will continue to enforce ROSCA against those who engage in such misconduct. No company, whether it is a small business or a member of the Fortune 500 like Adobe, is above the law.”

“Companies that sell goods and services on the internet have a responsibility to clearly and prominently disclose material information to consumers,” said U.S. Attorney Ismail J. Ramsey for the Northern District of California. “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.”

“Adobe trapped customers into year-long subscriptions through hidden early termination fees and numerous cancellation hurdles,” said Director Samuel Levine of the FTC’s Bureau of Consumer Protection. “Americans are tired of companies hiding the ball during subscription signup and then putting up roadblocks when they try to cancel. The FTC will continue working to protect Americans from these illegal business practices.”

Trial Attorneys Francisco L. Unger, Amber M. Charles, Zachary L. Cowan and Wesline N. Manuelpillai of the Civil Division’s Consumer Protection Branch and Assistant Director Zachary A. Dietert are handling the case, with assistance by Assistant U.S. Attorney David M. DeVito for the Northern District of California, in coordination with staff at the FTC’s Bureau of Consumer Protection.

A complaint is merely a set of allegations that, if the case were to proceed to trial, the government would need to prove by a preponderance of the evidence.

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