Adobe sued over termination fees, allegedly misleading customers

The U.S. government filed a lawsuit Monday against San Jose-based software manufacturer Adobe and two of its executives, alleging that the company was "thwarting" customers' attempts to cancel their subscriptions.

Adobe charges customers an "Early Termination Fee" of 50% of their remaining contract should they cancel after 14 days, according to the company's website.

But the government's complaint alleges that Adobe hid information about this fee in "fine print and inconspicuous hyperlinks" in violation of the Restore Online Shoppers' Confidence Act, legislation that requires online sellers to "conspicuously" disclose all material terms of a transaction to customers.

Federal prosecutors along with the Federal Trade Commission said Adobe's termination fee misled customers about the true cost of their subscriptions.

"We are transparent with the terms and conditions of our subscription agreements and have a simple cancellation process," said Dana Rao, Adobe's general counsel and chief trust officer, in an online statement. "We will refute the (Federal Trade Commission's) claims in court."

The complaint, filed in U.S. District Court for the Northern District of California, further alleges that Adobe subjected customers to a "convoluted" process to cancel their subscriptions. It alleges this complicated cancellation process also was in violation of Restore Online Shoppers' Confidence Act.

"Companies that sell goods and services on the internet have a responsibility to clearly and prominently disclose material information to consumers," said U.S. Attorney Ismail Ramsey in a press release announcing the lawsuit. "It is essential that companies meet that responsibility to ensure a healthy and fair marketplace for all participants. Those that fail to do so, and instead take advantage of consumers' confusion and vulnerability for their own profit, will be held accountable."