Adobe to Pay $150M in Settlement Over Subscription Cancellation Lawsuit

March 13 (Reuters) – Adobe, the maker of popular software such as Photoshop and Acrobat, has agreed to a $150 million settlement to resolve a lawsuit brought by the U.S. Department of Justice (DOJ) and the Federal Trade Commission (FTC). The case accused the company of misleading consumers by hiding steep termination fees and making subscription cancellations unnecessarily difficult.

Under the terms of the accord, Adobe will pay $75 million in civil penalties and provide an additional $75 million worth of free services to affected customers. The settlement still requires court approval before it can take effect.

The lawsuit, filed in June 2024, centered on Adobe’s “annual paid monthly” subscription plan. Regulators alleged that termination fees—sometimes amounting to hundreds of dollars—were buried in fine print, hidden behind hyperlinks, or obscured by text boxes. Consumers who attempted to cancel were often forced to navigate multiple web pages online or, if calling by phone, repeat their requests to several representatives while facing what the government described as “resistance and delay.”

Officials argued that Adobe’s practices violated the Restore Online Shoppers’ Confidence Act, a 2010 law designed to protect consumers from hidden charges and automatic renewals without clear disclosure and consent. The settlement also resolves claims against two Adobe executives who were named in the complaint.

Brett Shumate, head of the DOJ’s civil division, emphasized the broader consumer protection message: “American consumers deserve the right to make informed choices when deciding where to spend their hard-earned money.”

Adobe, in a statement posted on its website, noted that it has already taken steps in recent years to simplify and make its sign-up and cancellation processes more transparent. The company maintained that it disagreed with the government’s allegations and denied wrongdoing, but said it was “pleased to resolve this matter.”

The financial stakes are significant. Subscriptions accounted for 97% of Adobe’s $6.4 billion in revenue for the quarter ending February 27, underscoring how central recurring payments are to its business model. The settlement announcement also came just one day after CEO Shantanu Narayen revealed he would step down after more than 18 years at the helm, marking a major leadership transition.

Adobe’s shares have declined this year, reflecting investor concerns about how emerging artificial intelligence technologies may reshape the company’s prospects. The settlement adds another layer of uncertainty, but also signals a move to put longstanding regulatory disputes behind it.

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