The Federal Trade Commission announced an action against Adobe and two of its executives, Maninder Sawhney and David Wadhwani, alleging deceptive practices regarding Adobe's subscription services in violation of the Restore Online Shoppers' Confidence Act. According to the FTC, Adobe deceived consumers through hidden early termination fees and numerous cancellation hurdles.
The complaint, filed by the Department of Justice upon notification and referral from the FTC, asserts that Adobe steered consumers toward its "Annual, Paid Monthly" subscription plan (which happens to be its most lucrative), including by pre-selecting it as a default option in enrollment flows, and failed to disclose material terms of the plan. Such material terms included the existence and amount of the plan's early termination fee, which could cost consumers hundreds of dollars if the subscription was canceled within the first year. These disclosures were allegedly buried on the company's website in small print or required consumers to hover over small icons to locate.
Additionally, the complaint alleges that Adobe's cancellation processes, both online and via phone, were designed to be confusing and difficult. For instance, according to the FTC, consumers who attempted to cancel their subscriptions on the company's website were forced to navigate numerous pages, while those who reached out to Adobe's customer service to cancel experienced obstacles such as dropped calls and chats and multiple transfers. Many others consumers reported that Adobe continued to charge them post-cancellation attempts.
The action, filed in the U.S. District Court for the Northern District of California, seeks injunctive relief, civil penalties and equitable monetary relief.
As we have previously blogged about (see here and here), subscription programs continue to be a key enforcement priority for the FTC, underscoring the importance of reviewing your subscription flows for compliance. Your program is particularly vulnerable without, as relevant here, clear (unavoidable) disclosure of its material terms and cancellation method(s), a mechanism for capturing the consumer's affirmative consent to such terms and ongoing charges, and a simple and effective method of cancellation.
This action also marks another example in the rise of regulator action taken against corporate officers. We have previously seen this trend in the security space. Although the specific allegations against the Adobe officers were filed under seal, it is clear that the FTC is continuing its push for individual accountability.
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