Adobe to pay $75 million to settle US subscription terms lawsuit
Adobe is to pay $75 million and offer a further $75 million in free services to settle its high-profile lawsuit over its subscription practices, the US Department of Justice has announced.
The firm will also now be required to clearly disclose early termination fees for software subscriptions, and to provide subscribers with “easy ways” to cancel their subscriptions.
Adobe has not admitted any wrongdoing, issuing a statement that it disagreed with the DoJ’s claims that its terms of service violated the Restore Online Shoppers’ Confidence Act (ROSCA).
In separate news, after the settlement was announced, the UK’s Competition and Markets Authority announced that it is launching an investigation into Adobe over the same issue.
Subscribers ‘ambushed’ with hidden fees, lawsuit alleged
The DoJ launched the lawsuit – a civil action against Adobe and two of its senior executives – in 2024, over the termination fees for subscriptions using its annual, billed monthly plans.
It’s the default subscription plan for Adobe’s key software applications, including Photoshop and After Effects, and its Creative Cloud All Apps plans.
When browsing Creative Cloud subscriptions on Adobe’s website, the monthly prices displayed are for annual subscriptions.
What some subscribers failed to realise was that if you sign up to one of the plans, then cancel before the end of the year, you have to pay a fee: currently 50% of the lump sum remaining.
The DoJ’s action alleged that Adobe hides the information in its documentation, then “ambushes” subscribers with the early termination fee.
Proposed $150 million settlement includes fines and free services
Adobe has now settled with the Department of Justice without the case coming to trial.
Earlier this month, the DoJ announced that the proposed deal – which has yet to be entered by the court – would see Adobe pay $75 million in civil penalties.
Adobe will also provide affected customers with “free services” worth $75 million, although it isn’t clear exactly what form those will take.
As well as the financial terms, the proposed order stipulates that Adobe be required to “clearly disclose” the early termination fee before enrolling customers in subscriptions.
Adobe will also have to remind customers of the early termination fee before converting a free trial lasting longer than seven days into a paid subscription – the current trial period for an annual, billed monthly plan is 14 days – and provide “easy ways” to cancel subscriptions.
Just a slap on the wrist for Adobe?
Although the announcement is a symbolic victory for anyone who disliked Adobe’s subscription practices, the company itself hasn’t admitted any wrongdoing.
Its own statement says that while it has agreed to the settlement, “we disagree with the government’s claims”, and asserts that it is “transparent” with its subscription terms.
The fine agreed will also be pretty trivial for Adobe: the day before the settlement was announced, it announced a record $6.4 billion in revenue for the previous financial quarter.
In its analysis of the settlement, Ars Technica describes “writing a $75 million check to make this case go away” as “a big win for Adobe”.
Other commentators have noted the irony of offering free services to users who were, presumably, trying to cancel their subscriptions to those services in the first place.
Adobe now also under investigation in the UK
Adobe may now face similar actions in other countries.
Last Thursday, less than a week after the US settlement was announced, the UK Competition and Markets Authority (CMA) announced that has launched its own investigation into Adobe.
Again, it centers on whether the early cancellation fees in annual, billed monthly plans are unfair.
The CMA has currently not reached a conclusion on whether Adobe has broken UK law, and is now beginning an evidence-gathering process expected to take at least six months.
Read the US DoJ’s statement about the proposed settlement of its civil lawsuit against Adobe
Read Adobe’s statement about the settlement
Read the UK Competition and Markets Authority’s statement that it is investigating Adobe
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