Adobe Exec Says Early Termination Fees Are ‘Like Heroin’ for the Company

According to an unredacted Federal Trade Commission (FTC) complaint against Adobe, one company executive said that the early termination fees were “a bit like heroin for Adobe” and that removing them would be a “big business hit.”

The complaint, which was recently unredacted as reported by The Verge, alleges that Adobe “hides material terms” of its “Annual, Paid Monthly” (APM) subscription plan where consumers agree to a year-long commitment in exchange for agreeing to a “hefty” early termination fee (ETF) if they were to cancel early, one that the FTC complaint says can amount to hundreds of dollars.

“Adobe clearly discloses the ETF only when subscribers attempt to cancel, turning the stealth ETF into a powerful retention tool that generates significant revenues by trapping consumers in subscriptions they no longer want,” the complaint continues.

“During enrollment, Adobe hides material terms of its APM plan in fine print and behind optional textboxes and hyperlinks, providing disclosures that are designed to go unnoticed and that most consumers never see. Adobe then deters cancellations by employing an onerous and complicated cancellation process. As part of this convoluted process, Adobe ambushes subscribers with the previously obscured ETF when they attempt to cancel. Through these practices, Adobe has violated federal laws designed to protect consumers.”

Speaking to PetaPixel, Adobe’s general counsel and chief trust officer Dana Rao says that the “heroin” line isn’t even related to the case.

“We gave [the FTC] tens of thousands of documents from historical comments about everything that’s gone on with our subscription business. They look at this one thing, it’s pretty attention grabbing, and stuck it in the complaint even though it’s not even having to do with the complaint,” he says.

Rao also says that the person in question who was quoted isn’t part of the executive team that reports to Adobe CEO Shantanu Narayen, did not have any decision making authority, and also did not have access to information that would allow them to make an informed statement as to the value of ETF.

“ETF is less than half a percent of our revenue, like those fees, it doesn’t drive our business doesn’t drive our business decisions. It’s not something we think about when we think about how we structure plans or pricing,” Rao says.

Rao positions the value of ETF as not so high as to warrant being compared to a drug addiction Adobe can’t kick because it would be a “big business hit” as the quote claims.

The FTC complaint doesn’t say Adobe should not have an early termination fee — that is a pretty well-established, industry standard for subscriptions that are discounted in exchange for a commitment to a specified term — but rather claims Adobe makes it too hard to cancel or hid the fact an early termination fee would apply. It’s a fair point, then, to say including the attention-grabbing quote may be a bit of a heavy-handed over-reach.

“For years, Adobe has harmed consumers by enrolling them in its default, most lucrative subscription plan without clearly disclosing important plan terms,” the Department of Justice lawsuit alleges.

In response, Rao repeatedly points to times Adobe has made adjustments to its cancellation process to make it simpler, including making it as simple as four steps in an update in June 2023. Adobe started rolling out online cancellations in 2015.

Rao tells The Verge that clearly displaying the termination fee — which would likely have alleviated many of the FTC’s concerns — is not easy, since the fee varies depending on how much of a customer’s term remains.

“It will always depend on when you cancel. That’s how the fee is determined,” he says.

The full unredacted complaint can be read here.