Adobe Made Canceling Hard Now It Pays $75 Million

Image credit: Ina Fried/Axios

Adobe just agreed to a major settlement with the United States government after regulators said the company made it too hard for customers to cancel subscriptions. Adobe agreed to pay $75 million in penalties and also give customers another $75 million worth of free services. The case focused on subscriptions for tools like Photoshop and other products in Adobe’s Creative Cloud service.

The lawsuit was brought by the U.S. Department of Justice and the Federal Trade Commission. Regulators said Adobe did not clearly explain some cancellation fees. They also said customers sometimes had to click through many pages or contact customer support before they could cancel a subscription.

Regulators said this broke a U.S. consumer protection law called the Restore Online Shoppers’ Confidence Act. This law says companies must clearly explain subscription terms and make it easy for people to cancel recurring charges.

The case is also part of a bigger government crackdown on something called dark patterns. Dark patterns are tricks used on websites or apps that push people to do things they might not want to do. One common example is when signing up for a service is very easy but canceling it is much harder.

Large technology companies like Adobe usually carry several types of insurance that help protect them when lawsuits or investigations happen.

One important policy is called Directors and Officers insurance. This insurance protects company leaders when regulators or investors accuse them of making bad decisions. If regulators say company leaders approved misleading subscription practices, this type of insurance may help pay legal defense costs.

Another common policy for software companies is called Errors and Omissions insurance. This insurance protects companies when customers claim a product or service misled them or caused financial harm. If customers say subscription terms were confusing or fees were hidden, that type of claim can fall under this coverage.

Cases like this also involve regulatory investigations. Before a settlement happens, companies often spend months or years responding to subpoenas and document requests from the government. Lawyers must review emails, contracts, and internal records. Those legal bills can cost millions of dollars, and some insurance policies help cover those defense costs.

Customer lawsuits are another risk. When regulators say a company’s billing practices were misleading, customers sometimes file class action lawsuits asking for refunds. Insurance policies for technology companies often help cover legal costs in those cases.

Cyber insurance can also become relevant. Subscription services store customer accounts and billing information. If a dispute involves billing systems or customer data, cyber liability coverage may help with legal defense.

There can also be reputation damage. When a major company settles a government case, customers may lose trust. Some insurance policies include crisis management coverage that helps pay for public relations experts during major legal problems.

Employment risks can appear as well. Sometimes cases begin after employees raise concerns about company practices. If a worker later claims they were punished for speaking up, employment practices liability insurance could become involved.

Another possible risk involves shareholders. When a public company faces a major government investigation, investors sometimes sue and claim the company didn't properly warn them about legal risks. Those cases are usually handled through Directors and Officers insurance.

One important detail is that insurance usually doesn't pay government penalties. That means the $75 million fine Adobe agreed to pay most likely came directly from the company itself. Insurance typically helps with legal defense costs and civil lawsuits, but government fines are usually excluded.

The Adobe case shows how something as simple as a subscription cancellation process can turn into a major legal problem. For software companies that depend on subscriptions, the risks aren't just technical. They also involve consumer protection laws, government investigations, and several types of business insurance that may come into play when problems appear.