Adobe Braces For A Big Fine As FTC Investigates Subscription Cancellation Policy
in a recent filing with the United States Securities and Exchange Commission (SEC), Adobe disclosed that it has been cooperating with the Federal Trade Commission (FTC) as the agency investigates the software maker's subscription cancellation policy. If the FTC finds that Adobe violated the Restore Online Shoppers' Confidence Act, it could be in a for "significant" fine.
The FTC opened a civil investigation into the matter in June 2022. What appears to be the main issue is the way fees can apply in certain situations upon cancelling a subscription to Adobe's products. For example, Adobe's Photoshop plan includes access to Photoshop, Photoshop Express, Lightroom, Lightroom Classic, and Adobe Firefly, along with either 20GB of 1TB of online storage.
That plan is offered in two flavors: a prepaid annual plan at $119.88 per year for 20GB or $239.88 per year for 1TB, and annual with monthly installments of $9.99 per month for 20GB or $19.99 per month for 1TB. However, users who sign up for monthly installments are subject to an early termination fee if they cancel after 14 days, while the prepaid annual plan does not offer a refund (prorated or otherwise) after 14 days.
"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," Adobe disclosed.
Adobe didn't specific exactly how much any potential fines or a settlement might be, but did make clear they could be big enough to have a material impact on its earnings. While nothing has been determined yet, it sure seems like Adobe is bracing for a significant hit to its bottom line, as a result of the FTC's probe.
Shares of Adobe fell by as much as 8.5% after the filing, though it's started to creep back up in early trading hours day (it's up 0.9%) from its 24-hour low.
