Shares of Adobe Systems (NASDAQ:ADBE) fell over 2% Monday after the U.S. government sued the company. In addition, the Federal Trade Commission (FTC) also said it is taking action.
They accuse the Photoshop and Acrobat owner of hurting customers by registering them in its most lucrative subscription plans without clearly disclosing important terms.
The government filed a complaint in the San Jose, California, federal court.
It alleges Adobe didn't adequately inform consumers of hefty early termination fees when they signed up for "annual, paid monthly" subscription plans.
In addition, the government says Adobe hid essential terms in fine print and behind textboxes and hyperlinks and only clearly disclosed the fees when subscribers tried to cancel. The lawsuit reportedly pursues civil fines, an injunction, and other remedies.
Meanwhile, the FTC said that it is taking action against Adobe and two of its executives, Maninder Sawhney and David Wadhwani, for "deceiving consumers by hiding the early termination fee for its most popular subscription plan and making it difficult for consumers to cancel their subscriptions."
“Adobe trapped customers into year-long subscriptions through hidden early termination fees and numerous cancellation hurdles,” said Samuel Levine, Director of the FTC’s Bureau of Consumer Protection. “Americans are tired of companies hiding the ball during subscription signup and then putting up roadblocks when they try to cancel. The FTC will continue working to protect Americans from these illegal business practices.”
They explain that despite being aware of consumers’ problems with the early termination fee (ETF), the company continues its practice of steering consumers to the annual paid monthly plan while obscuring the ETF.
At the time of writing, Adobe shares are down 2.4% at $512.49 per share. The stock had rallied over 12% on Friday.