United States v. Adobe is a civil enforcement action brought by the United States, on referral from the Federal Trade Commission (FTC), against Adobe Inc. and two of its executives in the Northern District of California. The complaint alleged that Adobe enrolled consumers in its “Annual, Paid Monthly” (APM) subscription plan without clearly disclosing the one-year commitment and an early termination fee (ETF), and that it deterred cancellations, in violation of the Restore Online Shoppers’ Confidence Act (ROSCA).[1] After the court denied Adobe’s motion to dismiss, the parties agreed a stipulated order, entered on 2026-04-10, under which Adobe pays a $75 million civil penalty, offers consumers $75 million in free services and must change its disclosures and cancellation process.[2][3]
Background
The complaint described Adobe’s move, from around 2012, from perpetual licences to subscriptions that renew automatically, and alleged that subscription revenue accounted for $14.22 billion of Adobe’s $19.41 billion total revenue in 2023.[1] Adobe offered consumers three plan types: Monthly, Annual Paid Monthly and Annual Prepaid. According to the complaint, the APM plan was often pre-selected and, since at least 2019, cancellation before the end of the first year triggered an ETF of 50 percent of the “remaining contract obligation”, charged as a lump sum.[1]
ROSCA prohibits charging for online goods or services through a “negative option feature” unless the seller clearly and conspicuously discloses all material terms before obtaining billing information, obtains express informed consent, and provides simple mechanisms to stop recurring charges.[1]
The dispute
The complaint, filed on 2024-06-17 and refiled in redacted form on 2024-07-03, alleged that the plan selection page showed the ETF only as “Fee applies if you cancel after 14 days” with a tooltip that did not state the amount, and that the fee method appeared only at the bottom of a hyperlinked “Subscription and Cancellation Terms” pop-up.[1][5] It also alleged that subscribers cancelling online had to pass through several pages, a mandatory feedback page and retention offers, and that those cancelling by phone or chat had calls or chats dropped and were transferred between representatives.[1] The three counts were failure to disclose material terms and failure to obtain express informed consent (against all defendants) and failure to provide a simple cancellation mechanism (against Adobe).[1]
Adobe moved to dismiss, arguing among other things that it had clearly disclosed the annual term, the ETF and the fee method.[2]
Decision or outcome
On 2025-05-02 Judge Noël Wise denied the motion to dismiss on all counts. The court found that Adobe had clearly disclosed that the APM plan was annual, since “no reasonable consumer would believe” from the plan name and context that its term was other than one year, but that the complaint plausibly alleged that Adobe did not clearly and conspicuously disclose the ETF or its calculation method.[2]
The United States filed a proposed stipulated order on 2026-03-13, and the Justice Department announced the settlement the same day.[4][5] The court entered the order on 2026-04-10. In it the defendants neither admit nor deny the allegations.[3] For products including Creative Cloud Pro, Acrobat, Photoshop, Premiere, Illustrator and others, the order requires Adobe to disclose, before taking billing information, automatic charging, the duration of any commitment, the existence of an early cancellation fee and how it is calculated, and not only through a hyperlink or tooltip. It requires reminder emails before free trials longer than seven days convert, express consent to the negative option and any cancellation fee, and a cancellation mechanism through the same medium as sign-up, without a required interaction with an agent if none was needed to subscribe.[3] It enters a $75 million civil penalty judgment against Adobe, records Adobe’s agreement to offer $75 million in free services, and remains in effect for 10 years.[3]
Significance for software licensing and SAM practice
The case is a consumer protection action rather than a licence dispute, but it concerns the commercial terms of a software subscription: the commitment period hidden in a monthly price, and the cost of leaving early. The complaint and the order treat the length of the commitment, the existence of an early cancellation fee and the way it is calculated as material terms of the subscription.[1][3] The order applies to the listed Adobe products offered through a subscription with a negative option feature in the United States.[3]
Lessons learned
- A monthly price can hide an annual term. The APM plan billed monthly but carried a one-year commitment, and cancelling in the first year triggered a fee of 50 percent of the remaining obligation, according to the complaint.[1]
- Track term dates and fee methods. Because the ETF depended on the months remaining in the yearly term, the order requires Adobe to disclose how the fee is calculated so that consumers can “readily calculate the fee that would apply in any situation”.[3]
- Read what sits behind the link. The court found it plausible that disclosures in a tooltip and at the bottom of a hyperlinked terms page were not clear and conspicuous, and the order now bars making the required disclosures only that way.[2][3]