The US Department of Justice has finally come out with something that Photoshop users have been thinking about for years: “Adobe fails to adequately disclose to consumers that by signing up for the “Annual, Paid Monthly” subscription plan (APM Plan), they are agreeing to a year-long commitment and a hefty early termination fee (ETF).”
People who attempt to opt out of the software only learn of this ETF during the cancellation process itself, and it’s hefty enough to act as a retention tool on its own, entrapping consumers into the product at the point of enrolment. The issue is severe enough that the federal government is taking notice, as evidenced by the lawsuit that pits the company against the state. The details that the official complaint sets out make it clear that the cancellation fee is not Adobe’s only business strategy to keep their customers using their software. The lawsuit is the latest in a line of examples that the Biden administration is making on its commitment to upholding antitrust laws.
Early this June, the US Justice Department and the Federal Trade Commission filed a lawsuit against Adobe and two executives for their illegal consumer retention practices. The two executives are Adobe’s President of Digital Media David Wadhwani, and Adobe’s VP of Digital Go To Market and Sales Maninder Sawhney. Adobe however doesn’t seem to think that their actions were unfair. In a statement made to the media, Adobe’s general counsel and chief trust officer Dana Rao justified the company’s policies saying that: “Subscription services are convenient, flexible, and, cost-effective to allow users to choose the plan that best fits their needs, timeline, and budget.” She also emphasised that the company had always been ‘transparent’ with the terms and conditions of its subscription agreements and that the cancellation process was simple.
If Adobe is found guilty of neglecting to inform its consumers of the complete details of the terms and conditions of its subscription, the company will effectively be found guilty of breaching the Restore Online Shoppers’ Confidence Act (ROSCA). According to the Act, all third-party service providers who ‘sell’ their services online have the burden of disclosing all the material terms of the transaction and obtaining the consumer’s consent. Adobe is accused of getting around this requirement by hiding the terms of its payment plans “in fine print and behind optional textboxes and hyperlinks, providing disclosures designed to go unnoticed and that most consumers never see.” Furthermore, Adobe locks consumers into their products through a lengthy cancellation process. Cancelling an Adobe subscription allegedly comes with unnecessary steps and delays to discourage customers, as well as unsolicited offers and warnings against going through with it.
The redacted copy of the complaint even cites several incidents raised by customers: all on the difficulty of going through Adobe’s cancellation process. One example describes how a consumer tried to have their subscription to their software services cancelled via phone. Every conversation and correspondence only gave rise to “rigorous negotiation”, at the end of which they were offered two months at no charge. Speaking on the online ‘self-cancellation’ process, another customer stated that “Adobe literally will not” allow customers to cancel their subscriptions. Any attempt to do so locks customers into an endless loop of dialogue boxes.
The subscription model is a very lucrative one for Adobe, earning the company $7.71 billion in revenue in 2019. By 2023, this figure had nearly doubled to $14.22 billion. For context, Adobe’s total revenue in 2023 amounted to $19.41 billion. According to the complaint filed by the Department of Justice, Adobe only started selling its software under a subscription model in 2012. Before this, the company sold its software solutions under a perpetual licensing model, where customers got the software they paid for as an end product to be used indefinitely.
The outcome of the lawsuit will be an interesting one to other companies offering subscription-based software or Software as a Service (SaaS) products. The American government has been carrying out a sustained campaign against companies found to be in breach of anti-trust laws and Adobe’s verdict will likely have far-reaching implications in the industry. Meanwhile, customers can only resign themselves to carefully going through the terms and conditions of any new software product they purchase.
(Theruni Liyanage)