Hidden cancellation fees: Adobe fined millions
Adobe settles hidden cancellation fee lawsuit with a fine, but denies wrongdoing.
(Image: r.classen/Shutterstock.com)
Adobe has reached an agreement with the US government on a $75 million fine in a dispute over hidden cancellation fees. The company must also provide some customers with its software free of charge for a period. Adobe is pleased about the end of the dispute but denies any wrongdoing.
Since 2012, software manufacturer Adobe has relied on the Software-as-a-Service model, where customers sign up for a subscription to use programs like Photoshop, Premiere, or InDesign. However, subscribers who want to cancel within the first year face unpleasant surprises: Adobe charges a cancellation fee, costing 50 percent of what the subscription would have cost otherwise. This can easily amount to hundreds of euros.
Furthermore, the cancellation process is not exactly straightforward: According to the US Federal Trade Commission, Adobe unnecessarily forces subscribers who want to cancel online to click through numerous pages. Additionally, subscribers who cancel by phone reportedly encounter "resistance and delays from Adobe employees."
Adobe Executives in Court
For two executives at Adobe, the matter ended up in court: In the summer of 2024, two executives, David Wadhwani, President of the Digital Media division, and Maninder Sawhney, Senior Vice President of Digital Sales, along with Adobe as a company, were accused of luring consumers into one-year subscriptions through "hidden prepayment penalties and numerous cancellation hurdles." Consumers were not sufficiently informed about the expensive cancellation fees in the first year; a press release from the US Department of Justice regarding the current settlement states that the information was obscured by "hyperlinks and fine print."
In 2024, the US Department of Justice, upon notification from the FTC, filed a lawsuit in the US District Court for the Northern District of California in San Jose. Adobe is alleged to have violated the Restore Online Shoppers’ Confidence Act of 2010, a US law designed to protect consumers from hidden fees in online shopping.
Customers to be Contacted
With the current agreement, the legal dispute has come to an end, including for the two executives. In a statement, Adobe denies any wrongdoing but expresses its pleasure at the end of the legal proceedings. The company also announced that it will contact customers to whom it will now offer its software temporarily free of charge.
Adobe most recently generated around 96 percent of its revenue from its SaaS business, according to the first quarterly business report for 2026. The company achieved record revenue of $6.4 billion, an increase of 12 percent compared to the previous year, or eleven percent at constant currency exchange rates. Diluted earnings per share were $4.60 according to GAAP and $6.06 according to Non-GAAP.
Adobe CEO Shantanu Narayen announced his resignation this week, to take effect once a successor is found. Narayen will continue to serve on Adobe's board of directors. He was also instrumental in introducing the subscription model for software products at Adobe, which brought the company significant economic success. Following his resignation announcement, the Adobe stock fell by 7.58 percent on Friday.
(nen)
