Adobe said on Friday that it will pay $75 million to resolve a U.S. government lawsuit accusing the company of harming consumers by hiding heavy termination fees and making it difficult to cancel subscriptions.
The U.S. Department of Justice had accused Adobe of violating federal consumer protection laws by failing to properly disclose key terms associated with its “annual paid monthly” plans and by forcing Creative Cloud subscribers through what regulators described as an “onerous and complicated” cancellation process. According to the lawsuit, customers were then “ambushed” with early termination fees — something that one Adobe executive reportedly described as “a bit like heroin for Adobe,” according to a report by The Verge.
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As part of the settlement, Adobe said it will also provide $75 million worth of free services to “affected customers,” in addition to the payment being made to the Justice Department, pending final court approval. The company denied wrongdoing and said it has already improved transparency around subscription terms, plan details, and cancellation procedures in recent years.
“We have always prioritized giving our customers the flexibility to choose the plan that best fits their needs, timeline, and budgets. This includes offering multiple types of plans where customers can choose between lower upfront costs and maximum flexibility,” Adobe said in its statement. “While we disagree with the government’s claims and deny any wrongdoing, we are pleased to resolve this matter.”
The settlement comes just a day after CEO Shantanu Narayen announced he would step down after more than 18 years in the role. The announcement was delivered alongside a record-breaking first-quarter earnings report. Narayen, who joined Adobe in 1998 and became CEO in 2007, will remain with the company as executive chair of the board.
Adobe’s Board of Directors has formed a special committee to identify a successor, led by Lead Independent Director Frank Calderoni. The search will consider both internal and external candidates as the company looks to guide its next phase of AI-driven growth.
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Adobe recently saw backlash after it announced the shutdown of its 2D animation software Adobe Animate. However, it recently went back on the decision, saying there would no longer be a “deadline or date by which Animate will no longer be available.”
“Adobe Animate is in maintenance mode for all customers. This applies to individual, small business, and enterprise customers. Maintenance mode means we will continue to support the application and provide ongoing security and bug fixes, but we are no longer adding new features. Animate will continue to be available for both new and existing users – we will not be discontinuing or removing access to Adobe Animate,” Adobe said.