Adobe to pay $150M to settle 'unethical' subscription practices lawsuit
What's the story
Adobe has agreed to pay a whopping $75 million to settle a US government lawsuit. The case accused the software giant of harming consumers by hiding termination fees and making it difficult for them to cancel their subscriptions. Apart from this, the company will also provide $75 million worth of free services to customers, pending court approval.
Allegations
Allegations against Adobe
The lawsuit, filed in June 2024, accused Adobe of hiding termination fees for its popular "annual paid monthly" subscription plan. These fees could sometimes run into hundreds of dollars. The Justice Department and Federal Trade Commission also alleged that Adobe made it difficult to cancel subscriptions. Online canceling required users to navigate through multiple pages while phone canceling involved repeating information to several representatives and facing "resistance and delay."
Company statement
Settlement comes day after Narayen's resignation
In response to the allegations, Adobe said it has simplified its sign-up and cancelation processes in recent years. The company also clarified that while it disagrees with the government's claims and denies any wrongdoing, it is happy to resolve this matter. The settlement comes just a day after CEO Shantanu Narayen announced his decision to step down after over 18 years in the role.
Information
Subscription revenue and stock performance
Subscriptions accounted for a whopping 97% of Adobe's $6.4 billion revenue for the quarter ending February 27. However, despite this, the company's shares have taken a hit this year. Investors are worried about how artificial intelligence could affect Adobe's business prospects in the future.