Adobe is having a terrible month
- The Department of Justice is suing Adobe over deceptive subscription practices.
- The lawsuit claims Adobe hides fees and makes it hard to cancel subscriptions.
Adobe spent the first half of June addressing user fury around its terms of use. Before the controversy fully settled, the company is facing another significant challenge: a lawsuit from US regulators.
On Monday, the Department of Justice sued, saying Adobe violated consumer protection laws by hiding expensive fees and making it difficult to cancel subscriptions. The lawsuit follows a Federal Trade Commission investigation into Adobe's practices.
Regulators said in the complaint that Adobe entices people to "enroll in its default, most lucrative subscription plan without clearly disclosing important plan terms."
Per the DOJ, Adobe fails to tell users that when they sign up for an annual plan that's charged monthly, they are agreeing to a year-long commitment — including a termination fee that could be hundreds of dollars.
The disclosures are hidden behind optional textboxes and hyperlinks and are "designed to go unnoticed," the lawsuit said. Early termination fee details only appear when users try to cancel, effectively trapping them in subscriptions they don't want.
"Through these practices, Adobe has violated federal laws designed to protect consumers," prosecutors wrote.
Prosecutors wrote that the company has been made aware of government scrutiny into its subscription practices since June 2022, but continued with them.
The suit also names two Adobe executives as defendants: Maninder Sawhney, the senior vice president of digital go-to-market and sales, and David Wadhwani, the president of the digital media business. The complaint says both executives "directed, controlled," or "participated" in Adobe's practices.
Adobe plans to refute the government's claims in court, the company said in a statement.
"We are transparent with the terms and conditions of our subscription agreements and have a simple cancellation process," Dana Rao, Adobe's general counsel, said in the statement.
Adobe previously sold its popular products, like Photoshop, for an upfront fee. In recent years, it switched to monthly subscriptions, which investors prefer because revenue is easier to predict.
The company nearly doubled its subscription revenue from 2019 to 2023, to $14.2 billion. Adobe made $19.4 billion overall last year.
New terms of service lead to outcry
The lawsuit comes on the heels of another serious concern artists and designers have recently raised with Adobe products.
Earlier this month, the tech giant asked users to sign new terms with language that some thought implied that their content could be reproduced, displayed, or modified by Adobe — a big concern since Adobe is pushing hard into generative AI.
Some creators said they quit the platform over their licensing and AI scraping concerns, prompting the company to clarify the new terms in two blog posts over the last two weeks.
"Your content is yours and will never be used to train any generative AI tool. We will make it clear in the license grant section that any license granted to Adobe to operate its services will not supersede your ownership rights," a pair of Adobe executives wrote in the post.
The news even frustrated Adobe employees, who complained internally about the company's poor communication, Business Insider reported last week.
"The general perception is: Adobe is an evil company that will do whatever it takes to F its users," an employee wrote in an internal Slack message.
The clarifications did little to calm some customers.
"Pretending that this wasn't intentional only makes Adobe and its employees look even more pathetic," said Sasha Yanshin on X. Yanshin said that he canceled his Adobe subscription after many years as a customer.