FTC sues Adobe over subscription plans practices

Update: The story has been updated with comments from Adobe

The Federal Trade Commission said Monday that it has filed a lawsuit against Adobe (Nasdaq: Literary) and two of its executives regarding the software maker’s subscription plan practices.

Photoshop maker stock It fell 3% to $510.62.

The US antitrust watchdog said it was taking action against executives Maninder Sawhney and David Wadhwani for allegedly deceiving consumers by hiding early termination fees for the most popular subscription plan and making it difficult for consumers to cancel their subscriptions.

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

“Adobe locked customers into year-long subscriptions with hidden early termination fees and numerous cancellation hurdles.” He said Samuel Levin, Director of the Federal Trade Commission’s Bureau of Consumer Protection.

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

The FTC also alleged that Adobe prominently displays the “monthly” cost of a plan during signup, but buries the early termination fee and its amount on the company’s website in small print, requiring “consumers to hover over small icons to find the disclosures.”

“The complaint charges that Adobe’s practices violate the Online Shopper Trust Restoration Act,” the FTC added.

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

“We will refute the FTC’s allegations in court,” said Dana Rao, general counsel and CEO of Adobe.

Earlier in December, Adobe said it received a letter from the Federal Trade Commission in November regarding its subscriptions, and that it was working with the government agency on a potential settlement or resolution of the matter.