FTC sues Adobe over subscription plans practices

Update: The story was updated with comments from Adobe

The Federal Trade Commission on Monday said it has filed a lawsuit against Adobe (NASDAQ:ADBE) and two of its executives over the software maker’s subscription plans practices.

Shares of the Photoshop maker were down 3% to $510.62.

The U.S. antitrust regulator said it is taking action against executives Maninder Sawhney and David Wadhwani for deceiving consumers by hiding the early termination fee for its most popular subscription plan and making it difficult for consumers to cancel their subscriptions.

Wadhwani is the president of Adobe’s digital media business, and Sawhney is an Adobe vice president.

“Adobe trapped customers into year-long subscriptions through hidden early termination fees and numerous cancellation hurdles,” said Samuel Levine, Director of the FTC’s Bureau of Consumer Protection.

The FTC alleged that the company pushed consumers toward the “annual paid monthly” subscription without adequately disclosing that cancelling the plan in the first year could cost hundreds of dollars.

FTC also alleged that Adobe prominently shows the plan’s “monthly” cost during enrollment, but it buries the early termination fee and its amount on the company’s website in small print, which requires “consumers to hover over small icons to find the disclosures.”

“The complaint charges that Adobe’s practices violate the Restore Online Shoppers’ Confidence Act,” FTC added.

The San Jose, Calif.-based company said that it is transparent with the terms and conditions of its subscription agreements and has a simple cancellation process.

“We will refute the FTC’s claims in court,” said Dana Rao, General Counsel and Chief Trust Officer of Adobe.

Earlier in December, Adobe said it received a communication from the Federal Trade Commission in November about its subscriptions and that it is working with the government agency about a possible settlement or resolution of the matter.