In a recent disclosure, Adobe has revealed an ongoing investigation by US regulators, particularly the Federal Trade Commission (FTC), into the company’s subscription cancellation rules for software. The inquiry, which began in June 2022, could potentially lead to “significant monetary costs or penalties,” according to Adobe’s filing.
Users of Adobe’s popular programs such as Photoshop and Premiere have long voiced concerns about the expense associated with canceling subscriptions, with costs exceeding $700 annually for individual users. Unlike some other digital services like Spotify and Netflix, Adobe imposes a cancellation fee if subscribers do not cancel within two weeks of their subscription purchase, resulting in a prorated penalty.
The FTC’s attention to Adobe’s subscription cancellation practices aligns with its broader focus on digital subscriptions. Earlier this year, the FTC proposed a rule advocating for consumers’ ability to cancel subscriptions as effortlessly as they sign up for them, aiming to prevent companies from making the cancellation process burdensome for users. US President Joe Biden emphasized the need for streamlined cancellation processes, stating that companies often make it challenging for consumers to unsubscribe, wasting both time and money.
Adobe disclosed that the FTC informed the company in November about its authority to engage in consent negotiations regarding the investigation. While Adobe maintains that its practices comply with the law, it is currently in discussions with FTC staff.
In addition to the subscription-related scrutiny, Adobe is also navigating regulatory concerns surrounding its proposed $20 billion acquisition of design software maker Figma. The company expressed strong disagreement with findings released by the UK’s competition regulator last month. Furthermore, Adobe disclosed that the US Justice Department is considering action against the acquisition, with a decision expected “soon.”
Despite reporting robust financial results, including a record-breaking $5.05 billion in revenue for Q4 and reaching the $5 billion quarterly mark for the first time, Adobe’s shares experienced a 6% decline in extended trading after the release of its Q4 and FY 2023 results. Adobe executives forecasted Q1 2024 revenue between $5.1 and $5.15 billion, with annual revenue projected to surpass $21.3 billion.
As the investigation unfolds, Adobe faces potential financial implications that could impact its operations and results, prompting the company to address the regulatory challenges it currently confronts.
