Adobe Exec Calls Creative Cloud Cancellation Fees “Heroin”: Is the Software Giant Addicted to Its Users?

Adobe’s "Heroin" Problem: The FTC Takes Aim at Creative Cloud’s Subscription Practices

The battle between Adobe and the Federal Trade Commission (FTC) over the company’s Creative Cloud subscription service has reached a boiling point. The FTC’s unredacted complaint paints a grim picture of Adobe’s allegedly deceptive practices, revealing internal discussions where executives likened early termination fees (ETFs) to "heroin" for their revenue-generating potential. These revelations have sparked intense debate over the legality of Adobe’s practices and the role of the FTC in ensuring consumer protection in the digital age.

At the heart of the dispute are Adobe’s “annual billed monthly” (ABM) Creative Cloud subscriptions, which offer a lower monthly price compared to standard monthly subscriptions but impose significant upfront commitment and hefty ETF’s if canceled early. The FTC alleges that Adobe has been intentionally obscuring the existence and details of these fees during the sign-up process, leaving consumers blindsided by unexpected charges when they attempt to cancel.

The leaked internal discussions, detailed within the unredacted complaint, suggest a calculated strategy by Adobe to maximize revenue through ETFs. One executive is quoted as saying, "There is absolutely no way to kill off ETF or talk about it more obviously" without "taking a big business hit." This statement, however, has been countered by Adobe’s general counsel and chief trust officer Dana Rao, who insists that the quoted employee was not a member of the company’s leadership and that ETFs represent a negligible portion of Adobe’s overall revenue.

"It doesn’t drive our business, it doesn’t drive our business decisions." Rao stated, downplaying the importance of ETFs to the company’s financial success.

However, the FTC’s complaint goes further, highlighting internal documents that illustrate a pattern of deliberate obfuscation. Adobe executives are shown to have been aware of studies, such as one conducted by Forrester Research in 2022, that revealed widespread customer confusion and dissatisfaction regarding ETFs and the ABM plan’s one-year commitment. Despite this, the company reportedly chose to maintain its practice of burying crucial information about ETFs within complex menus and dense legal text, leading to consumer frustration and accusations of misleading practices.

"We always have to balance the need to be clear and conspicuous with our terms… with the number of things we need to be clear and conspicuous about. And so there’s a lot of things we can put into that box, but it’s not a big box." Rao explained, arguing that providing upfront details of the ETF would clutter the user interface.

The FTC’s lawsuit against Adobe centers around the Restore Online Shoppers’ Confidence Act (ROSCA), a law designed to protect consumers from deceptive practices in online transactions. Under ROSCA, online retailers are required to disclose all "material terms of the transaction," including potential fees, "clearly and conspicuously," before obtaining the consumer’s billing information. The FTC alleges that Adobe’s practice of hiding ETF information violates these provisions.

However, the recent Supreme Court decision in Loper Bright v. Raimondo, overturning the longstanding principle of Chevron deference, has potentially shifted the landscape of this legal battle. Chevron deference traditionally allowed courts to grant substantial weight to agency interpretations of laws, including the FTC’s interpretation of "clearly and conspicuously" and "simple" within ROSCA.

This decision could give Adobe an opportunity to argue its cancellation flow is in fact "simple" and that the FTC’s interpretation of ROSCA is overly broad. While Rao hinted that Adobe intends to challenge the FTC’s case on multiple fronts, it remains unclear if this new legal terrain will favor the company’s position. "Now we have a post-Chevron world," Rao remarked, "and I think you can really take a look at when do you want to defer to the agency and when not to."

This case shines a light on the growing tensions between the need for clear consumer protections and the complex, often confusing world of digital subscriptions.

Here are some key takeaways from this ongoing legal battle:

• The role of opaque subscription terms: The Adobe case highlights the need for companies to be more transparent about their subscription terms, especially when implementing hidden fees and commitment periods.
• The limitations of ROSCA: The effectiveness of ROSCA as an instrument for consumer protection may be hampered by the Supreme Court’s decision in Loper Bright v. Raimondo.
• The evolving legal landscape: The post-Chevron era makes it harder to predict the outcome of cases involving agency interpretations of laws, as courts now have greater freedom to make their own rulings.
• The need for greater transparency in the digital marketplace: This case underscores the need for greater transparency and accountability in the digital marketplace to ensure fair practices and protect consumers from potentially deceptive business models.

The battle between Adobe and the FTC is likely to have far-reaching implications, shaping the future of subscription services and consumer protections in the digital age. It remains to be seen whether Adobe will be able to successfully challenge the FTC’s complaint and whether the court will consider the company’s cancellation flow "simple" in a post-Chevron world. Regardless of the outcome, this case serves as a cautionary tale for businesses operating in the online space, reminding them of the importance of ethical practices and transparent communication with their customers.

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