Adobe Hit With $150 Million Penalty for Making It Too Hard to Cancel

Adobe has agreed to a $150 million settlement with the US Department of Justice, ending a two-year federal lawsuit that accused the Photoshop and Acrobat maker of deliberately concealing early termination fees and engineering its subscription cancellation process to deter customers from leaving.

The settlement, announced on March 13, 2026, ends a case filed in June 2024 that accused Adobe of hiding hefty early termination fees in fine print and making it unnecessarily difficult for customers to cancel their subscriptions. The DOJ pursued the case jointly with the Federal Trade Commission, and named two Adobe executives — Maninder Sawhney, a company vice president, and David Wadhwani, president of Adobe’s digital media business — personally in the complaint.

The Mechanics of the Trap

The government’s case centred on Adobe’s most popular pricing tier — the “Annual, Paid Monthly” subscription plan. The plan was presented as the default during sign-up, with the attractive monthly price displayed prominently. What was not prominently displayed was the commitment attached to it.

The DOJ argued that Adobe “fails to adequately disclose to consumers that by signing up for the ‘Annual, Paid Monthly’ subscription plan, they are agreeing to a yearlong commitment and a hefty early termination fee that can amount to hundreds of dollars. Adobe clearly discloses the early termination fee only when subscribers attempt to cancel, turning the stealth early termination fee into a powerful retention tool that traps consumers in subscriptions they no longer want.”

Regulators further alleged that Adobe forced subscribers to navigate a “complex and challenging” cancellation process designed to deter them from cancelling, in violation of ROSCA — the Restore Online Shoppers’ Confidence Act — which requires companies to provide consumers with a simple mechanism to cancel online subscriptions.

The case was also brought under ROSCA because the statute allows for significant civil penalties and injunctive relief, giving regulators tools to force operational change rather than merely extract a financial settlement.

The Settlement Structure

Adobe has agreed to pay $75 million to the Department of Justice and an additional $75 million worth of free services to its customers. Adobe has confirmed it will proactively contact qualifying customers once the court formally accepts the proposed order, though full eligibility criteria have not yet been published.

Going forward, Adobe will be required to clearly disclose any Early Termination Fee and how it is calculated before enrolling customers in subscriptions. For any free trial lasting longer than seven days, Adobe must also remind customers before converting them into a paid subscription. Furthermore, Adobe will be required to provide subscribers with easy ways to cancel.

The behavioural requirements imposed by the settlement are, in practice, more consequential than the penalty itself. Adobe’s subscription model is its entire business. Subscriptions accounted for 97% of Adobe’s $6.4 billion in revenue for the quarter ending February 2026 — which means the cancellation friction under scrutiny was directly protecting the company’s core income engine. Any structural change to how customers can exit will have measurable revenue implications over time.

Adobe’s Position

Adobe stated: “We are transparent with the terms and conditions of our subscription agreements, have a simple cancellation process and clearly disclose the details of our plans, which we carefully crafted to maximise value and benefits to our customers. In recent years, we have made our sign-up and cancellation processes even more streamlined and transparent.” The company denied any wrongdoing as a condition of the settlement.

The timing of the announcement is notable. It came the day after Adobe’s long-serving chief executive Shantanu Narayen stepped down after 18 years leading the company, with the board having initiated a formal search for his successor. Adobe is simultaneously navigating the aftermath of its failed $20 billion bid to acquire design platform Figma — abandoned in 2023 following antitrust opposition — and intensifying competition from AI-native creative tools that are challenging Creative Cloud’s dominance across photography, video, and design.

A Warning for the Wider Industry

For businesses across Europe that rely on Adobe’s tools — Photoshop, Acrobat, Lightroom, Premiere Pro — the settlement’s immediate practical effect is clearer fee disclosure before sign-up, reminder notifications before free trials convert to paid plans, and a simpler cancellation path.

The broader regulatory signal is harder to ignore. The DOJ and FTC have demonstrated a clear willingness to pursue major software companies over subscription design practices that were, until recently, treated as a standard feature of the SaaS business model. Adobe’s case sits within a wider pattern of accelerating Big Tech regulatory enforcement — one that EBM has tracked closely, including Europe’s own escalating crackdown on Big Tech under the Digital Markets Act and Digital Services Act, and the deepening EU-US regulatory clash over who sets the rules for the global technology industry.

The EU has pursued similar dark-pattern enforcement through its Digital Services Act framework, which explicitly prohibits interface designs that manipulate user behaviour. On both sides of the Atlantic, regulators are arriving at the same conclusion: hiding exit costs in fine print is not a pricing strategy — it is a consumer protection violation.

Companies that have relied on similar mechanics to protect subscription revenue — and there are many — would be wise to treat this settlement as a warning rather than an isolated outcome.

FAQs

Will Adobe customers automatically receive compensation from the $75 million free services fund?

Adobe has confirmed it will proactively contact qualifying customers once the court formally accepts the settlement order. Eligibility criteria have not been published in full, but the free services element targets customers affected by the early termination fee practices described in the DOJ complaint.

What is ROSCA and why does it matter for subscription businesses?

The Restore Online Shoppers’ Confidence Act requires companies selling goods or services online to clearly disclose all material terms before charging customers and to provide a simple cancellation mechanism. The Adobe case is one of the most high-profile ROSCA enforcement actions to date, signalling that regulators are prepared to pursue major technology companies over subscription design that obscures costs or complicates exit.