Adobe Agrees to $150 Million Settlement Over Alleged Subscription Practices That Misled Customers

Key Takeaways

• $150 Million Settlement: Adobe agreed to a proposed settlement requiring $75 million in civil penalties and $75 million in free services for customers.
• ROSCA Allegations: The Justice Department claims Adobe violated the Restore Online Shoppers’ Confidence Act by failing to clearly disclose key subscription terms.
• Early Termination Fee Disclosure: Regulators say details about potentially significant cancellation fees were hidden in fine print and hyperlinks.
• Difficult Cancellation Process: Customers allegedly faced multiple steps, delays, warnings, and offers when trying to cancel subscriptions.
• New Consumer Protections: The proposed order would require clearer disclosures, reminders before certain trial conversions, and simpler cancellation options.

Deep Dive

Adobe has agreed to a proposed $150 million settlement with the U.S. Department of Justice to resolve allegations that the company’s online subscription practices violated federal consumer protection law, marking one of the most prominent enforcement actions to date involving digital subscription models.

The proposed settlement, filed Friday in the U.S. District Court for the Northern District of California, would require Adobe to pay $75 million in civil penalties and provide $75 million in free services to customers. The agreement also includes an injunction requiring the company to change how it discloses subscription terms and how customers cancel their plans.

The Justice Department’s complaint names Adobe Inc. along with two company executives, Maninder Sawhney and David Wadhwani, and centers on alleged violations of the Restore Online Shoppers’ Confidence Act (ROSCA), a federal law designed to ensure that online subscription services clearly disclose key terms and provide simple ways for consumers to cancel.

Government Claims Customers Were Not Clearly Told About Fees

At the center of the case are Adobe’s subscription plans, which regulators say did not adequately disclose important terms to customers signing up for the service.

According to the complaint, information about a potentially significant Early Termination Fee was presented through fine print and inconspicuous hyperlinks, rather than through clear, upfront disclosures during the enrollment process. As a result, the government alleges that customers could commit to subscription plans without fully understanding the financial consequences of canceling early.

The Justice Department also claims that once customers attempted to cancel their subscriptions, they encountered a cancellation process that was unnecessarily difficult.

Subscribers were allegedly forced to navigate multiple steps and delays, while also being presented with warnings and offers designed to keep them from leaving. Regulators described these processes as convoluted and inefficient, making it far harder to cancel than to sign up.

Such practices, the government argues, violate ROSCA’s requirement that companies offering online subscriptions clearly disclose key terms and provide straightforward cancellation mechanisms.

Settlement Would Require Clearer Disclosures and Easier Cancellation

If approved by the court, the proposed settlement would impose new requirements intended to make subscription terms more transparent for consumers.

Adobe would be required to clearly disclose any Early Termination Fee and how it is calculated before customers enroll in a subscription plan. The order would also require the company to notify customers before certain free trials convert into paid subscriptions.

Specifically, if a free trial lasts longer than seven days and converts into a paid plan that includes an Early Termination Fee, Adobe must remind customers before the trial period ends.

The agreement would also require Adobe to ensure that subscribers have easy ways to cancel their subscriptions, addressing what regulators described as one of the most problematic aspects of the company’s current practices.

DOJ Signals Continued Scrutiny of Subscription Models

In announcing the proposed settlement, Assistant Attorney General Brett A. Shumate, who leads the Justice Department’s Civil Division, said the case reflects the government’s broader effort to address deceptive or unfair practices in online commerce.

“American consumers deserve the right to make informed choices when deciding where to spend their hard-earned money,” Shumate said. “The Justice Department will strongly oppose any attempt to harm Americans with deceptive and unfair business practices.”

The proposed order must still be approved by the federal court before it takes effect.

Regulators in the United States and abroad have increasingly focused on whether companies are using design practices that make it easier to subscribe than to cancel, a category of conduct often referred to as “dark patterns.”

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