Adobe’s subscription model has faced criticism for its strict cancellation policies. Unlike more flexible services like Spotify and Netflix, Adobe imposes stringent conditions and penalties for canceling subscriptions. Users are given a narrow two-week window post-purchase for a full refund, beyond which they face prorated penalties. This approach contrasts starkly with other digital services that either don’t charge cancellation fees or offer more lenient terms, leading to significant customer dissatisfaction and now, regulatory scrutiny.
The FTC’s investigation into Adobe’s subscription practices is centered around the Restore Online Shoppers’ Confidence Act (ROSCA). ROSCA requires that companies provide clear and conspicuous information about the terms of any automatic renewal or continuous service offer on the internet, obtain express informed consent before charging consumers, and provide simple mechanisms for stopping recurring charges. The FTC is focusing on these principles, particularly the ease of cancellation, as it aligns with its broader mission to protect consumers from deceptive or unfair business practices in digital services.
The investigation could result in significant costs or penalties for Adobe, affecting its financial performance. This comes alongside challenges Adobe faces with its proposed $20 billion acquisition of Figma Inc., facing opposition from UK and US regulators.
INSIDER TAKE:
The FTC’s recent focus on digital subscriptions involves a proposed rule demanding that subscription cancellations be as straightforward as signing up and this action reflects wider concerns about unfair consumer practices in digital services.
The outcome of this high-profile investigation could set a precedent for subscription-based businesses moving forward. Adobe’s case underscores the balance companies must strike between profitable subscription models and fair consumer practices.
