Adobe faces significant penalty from FTC over service cancellation practices

Adobe faces significant penalty from FTC over service cancellation practices

Adobe is anticipating a substantial fine from the US Federal Trade Commission (FTC) as part of a settlement regarding its service cancellation practices. The company revealed this information in a filing with the Securities and Exchange Commission (SEC). Adobe stated that it believes its practices are in compliance with the law and is currently in discussions with FTC staff. The resolution of this matter could result in significant monetary costs or penalties, which may impact the company’s financial results and operations.

The FTC has been using the Restore Online Shoppers’ Confidence Act to target major tech companies for negative billing and cancellation practices. This Act stipulates that subscription services must promptly honor cancellation requests, not restrict cancellations to phone-only, adequately staff customer service, simplify the cancellation process, and immediately accept and process cancellations before the next billing cycle.

While Adobe did not specify the FTC’s focus, there are numerous complaints in online forums regarding penalties for late cancellation of products like Photoshop and Premiere Pro.

In a separate issue, regulators, including the European Commission (EC), the Competition and Markets Authority (CMA) in the UK, and the US Department of Justice (DOJ), are opposing Adobe’s acquisition of Figma. The EC and the CMA have expressed concerns about potential competition issues, and the DOJ is expected to make a decision on this matter soon.

Additionally, Adobe’s announcement of lower revenue forecasts for 2024 led to a 5% drop in its shares during after-hours trading. Despite achieving over $5 billion in quarterly revenue and a net income of $1.48 billion, the conservative 2024 guidance raised questions from analysts during the company’s quarterly analyst call. Adobe’s CEO, Shantanu Narayen, addressed this by highlighting the company’s growth ambitions while remaining conservative, especially in light of significant AI developments in the market. Narayen also expressed excitement about the potential with Figma despite the regulatory challenges.

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