Adobe faces troubling FTC lawsuit for ‘trapping' customers

Adobe  (ADBE) has become the latest target of the U.S. government's crackdown on companies accused of deceiving customers out of money through unlawful business practices.

The Federal Trade Commission has just filed a lawsuit against Adobe after it allegedly for years “harmed consumers by enrolling them in its default, most lucrative subscription plan without clearly disclosing important plan terms,” making it hard for them to cancel as the company drains their pockets.

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Adobe’s “Annual, Paid Monthly” subscription plan, which is $54.99 a month, offers users access to the company’s software applications, such as Photoshop, Acrobat, and Illustrator, which are often popular amongst students and businesses.

The lawsuit, which was filed on June 17, claims that Adobe “fails to adequately disclose” to its customers that when they sign up for its “Annual, Paid Monthly” subscription plan, they are making a yearlong commitment and an early termination fee can cost them hundreds of dollars, eventually “trapping” them into retaining their subscriptions.

“During enrollment, Adobe hides material terms of its APM (Annual, Paid Monthly subscription) plan in fine print and behind optional textboxes and hyperlinks, providing disclosures that are designed to go unnoticed and that most consumers never see,” reads the lawsuit. “Adobe then deters cancellations by employing an onerous and complicated cancellation process. As part of this convoluted process, Adobe ambushes subscribers with the previously obscured ETF (early termination fee) when they attempt to cancel. Through these practices, Adobe has violated federal laws designed to protect consumers.”

The FTC claims that it has received numerous complaints from consumers about Adobe’s controversial practices as many said they were confused about what they were fully signing up for and were blindsided by the early termination fee.

Through the lawsuit, the FTC seeks “injunctive relief, civil penalties, equitable monetary relief, as well as other relief.”

TheStreet reached out to Adobe for comment but didn't immediately receive a response. 

It appears that Adobe's stock price hasn't been negatively affected by the FTC's lawsuit. At last check on Tuesday afternoon, the stock was priced at around $525 a share, which is boost from the $518 that it was selling for at its previous close. 

The company has been doing well financially as it revealed in its second-quarter earnings report for 2024 that it earned a revenue of $5.3 billion during the quarter, which is a 10% increase from what it reported during the same time period last year.

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Adobe has recently faced heat from customers over a major change

The lawsuit comes after Adobe faced backlash from its customers last week after it began forcing them to accept its updated terms of service agreement for Photoshop that states that the company will have a right to access users’ work within the program so that it can use it to train artificial intelligence, among other reasons.

If customers did not accept the agreement, they were locked out of using photoshop which angered a plethora of customers.

So am I reading this, right? @Adobe @Photoshop

I can't use Photoshop unless I'm okay with you having full access to anything I create with it, INCLUDING NDA work? pic.twitter.com/ZYbnFCMlkE— Sam Santala (@SamSantala) June 5, 2024

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