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US regulators want Adobe to stop hiding its "stealth" cancellation fees. But that may be a difficult transition, as one Adobe exec suggests the company's strategy is "a bit like heroin."
In a June filing made public this week, the FTC says an unnamed Adobe executive described hidden early termination fees (ETFs) as "a bit like heroin for Adobe," adding "there is absolutely no way to kill off ETF or talk about it more obviously [without] taking a big business hit."
The FTC sued Adobe last month over the Photoshop maker's hidden fees. Adobe doesn't adequately warn users when signing up for its "annual, paid monthly" cloud subscriptions that cancellation before the end of a year-long contract can result in hundreds of dollars in fees, the agency says. Adobe only "clearly discloses" an ETF when users try to cancel.
A screenshot from the lawsuit shows that Adobe describes the ETF on its Creative Cloud subscription as simply: "Fee applies if you cancel after 14 days." Many customers, however, weren't aware of the cancellation fee when signing up, the FTC says.
Users have to click or hover over an information "i" icon to view more text on this, which adds: "If you cancel after 14 days, your service will continue until the end of that month's billing period, and you will be charged an early termination fee." But Adobe doesn't say how much that fee is.
The ETF can vary quite a bit because Adobe wants users to fork over half the remaining subscription costs when they cancel. For those who cancel in the eleventh month of a year-long subscription, the cancellation fee is $30. But those who cancel within their first month are forced to pay $330. Adobe applies this termination fee structure to its Creative Cloud "all apps" plan, its Creative Cloud single app plan, and its Photography plan.
The FTC says Adobe is aware of how its unclear disclosures "harm and mislead consumers" and alleges Adobe is breaking the Restore Online Shoppers' Confidence Act and the FTC Act as a result. Back in December, Adobe warned its investors that it may face an FTC fine over its subscription-cancellation policies.
In a statement, Adobe's general counsel Dana Rao tells PCMag: "We strongly disagree with this lawsuit’s characterization of our business and we will refute the FTC’s claims in court. The complaint is taking an old offhand comment out of context from years ago, out of the tens of thousands of documents Adobe provided to the FTC."
Rao added the cancellation fees have "minimal impact" on Adobe's revenue. Adobe also published a response to the FTC on its website.
Editor's Note: This story has been updated to include comment from Adobe.