The FTC is investigating Adobe, after widespread consumer complaints that the company makes it too hard to cancel app subscriptions.
Adobe was one of the earliest software companies to switch from a one-off purchase model to recurring subscriptions, but consumers have long complained that it’s easier to start a subscription than it is to end one …
Adobe revealed the Federal Trade Commission (FTC) investigation in a regulatory filing with the Securities and Exchange Commission (SEC).
The SEC requires companies to disclose any material risks which might affect their profitability, in order to ensure that investors are making informed decisions. Adobe disclosed the investigation, stating that it may face penalties, other costs – and that its income might be affected.
Since June 2022, we have been cooperating with the Federal Trade Commission (“FTC”) staff in response to a Civil Investigative Demand seeking information regarding our disclosure and subscription cancellation practices relative to the Restore Online Shoppers’ Confidence Act. In November 2023, the FTC staff asserted that they had the authority to enter into consent negotiations to determine if a settlement regarding their investigation of these issues could be reached.
We believe our practices comply with the law and are currently engaging in discussion with FTC staff. The defense or resolution of this matter could involve significant monetary costs or penalties and could have a material impact on our financial results and operations.
This has been a hot-button issue for the FTC for some time. Back in March, the regulator proposed ‘click to cancel’ regulations, laying out exactly what companies should do.
- A simple cancellation mechanism: If consumers are unable to easily leave any program when they want to, the negative option feature becomes nothing more than a way to continue charging them for products they no longer want. To address this issue, the proposed rule would require businesses to make it at least as easy to cancel a subscription as it was to start it. For example, if you can sign up online, you must be able to cancel on the same website, in the same number of steps.
- New requirements before making additional offers: The proposed rule would allow sellers to pitch additional offers or modifications when a consumer tries to cancel their enrollment. But before making such pitches, sellers must first ask consumers whether they want to hear them. In other words, a seller must take “no” for an answer and upon hearing “no” must immediately implement the cancellation process.
- New requirements regarding reminders and confirmations: The proposed rule would require sellers to provide an annual reminder to consumers enrolled in negative option programs involving anything other than physical goods, before they are automatically renewed.
One tactic used by some companies is to interrupt a subscription cancellation with an offer intended to persuade you to change your mind. Typically, this would be a reduced subscription for a certain period of time, or the offer of a more limited tier at a lower price.
The FTC says this should be allowed, but consumers must first be asked whether they are interested in hearing about any offers. If they say no, then the flow must proceed direct to cancellation.
Another issue – and one which may well affect Adobe – is consumers trying out a subscription and then forgetting to cancel. With Adobe, you can only cancel within the first two weeks, otherwise you are charged a proportional fee.
Additionally, Adobe does not issue an annual reminder of your subscriptions, as some companies do – instead, the account simply auto-renews without notice.
FTC: We use income earning auto affiliate links. More.
Comments