Adobe pre-selected an "annual, paid monthly" plan and showed the monthly price prominently, but cancelling in the first year triggered an early termination fee of 50% of the remaining payments. The US Department of Justice sued in June 2024, alleging the fee was hidden and cancellation was made hard. In March 2026 Adobe agreed to a $150 million settlement and an injunction requiring clear fee disclosure.
Key takeaways
- Adobe's default plan was annual, paid monthly. Cancelling in year one cost 50% of the remaining monthly payments.
- The DOJ sued Adobe and two executives under ROSCA in June 2024, alleging the fee was buried in fine print and cancellation was convoluted.
- On 13 March 2026 Adobe agreed to a $150 million settlement: a $75 million civil penalty plus $75 million in free services.
- Minimum-commitment plans are fine. Hiding the commitment isn't.
You need Photoshop for one project.
You go to Adobe's website. There's a plan already selected, with a friendly monthly price in big type. You click through, pay, do your project, and a few months later you go to cancel.
That's when you find out. You weren't on a monthly plan. You were on an annual plan, paid monthly. And leaving early costs 50% of the remaining payments.
Potentially hundreds of dollars, for a subscription you thought you could walk away from.
That, according to the US government, is how a lot of Adobe customers met the early termination fee.
What did Adobe actually do?
Adobe's Creative Cloud is one of the great subscription stories: from boxed software to recurring revenue. But one design choice became a legal liability.
Adobe's website pre-selected the "annual, paid monthly" plan and prominently showed the monthly price. Cancelling in the first year triggered an Early Termination Fee of 50% of the remaining monthly payments. The complaint says it was buried.
In June 2024, the US Department of Justice, on referral from the FTC, sued Adobe and two executives, Maninder Sawhney and David Wadhwani, under the Restore Online Shoppers' Confidence Act (ROSCA).
The government alleged that Adobe:
- used fine print and inconspicuous hyperlinks to hide subscription information, including a "hefty Early Termination Fee";
- made cancellation "convoluted and inefficient," with unnecessary steps, delays, unsolicited offers and warnings.
How did the case end?
With a very large bill.
On 13 March 2026, the DOJ announced Adobe had agreed to a $150 million settlement:
| Part of the settlement | Amount |
|---|---|
| Civil penalty | $75 million |
| Free services for customers | $75 million |
| Total | $150 million |
Plus an injunction. Under the proposed order, Adobe must:
- clearly disclose any early termination fee, and how it's calculated, before enrolling customers;
- remind customers before converting a free trial longer than seven days into a paid plan with an early termination fee;
- give subscribers easy ways to cancel.
The order was filed in the Northern District of California and takes effect only once the court enters it. The DOJ's release describes the claims as allegations.
Was the plan itself the problem?
No. And this is the important bit.
Model #8 in The Subscription Playbook is minimum commitment. I used Stripe as the example: once a merchant is processing a reasonable volume, Stripe often offers a lower rate in return for a 12-month commitment. "Stick with us for the next year and we'll take less of your money!" Both sides win, and both sides know the deal.
That's a legitimate model. An annual plan, paid monthly, with a discount for committing, is a perfectly good offer.
What I also wrote, about phone companies that lock customers in with penalty fees: "These fees are very unpopular with customers, so use this strategy cautiously!"
Adobe's problem, as alleged, wasn't the commitment. It was that customers didn't know they'd made one.
My take
Here's the test I use. If a customer would be surprised by your exit fee, it's hidden, no matter what your terms say. A commitment people knowingly sign up for builds loyalty. A commitment people discover when they try to leave builds resentment, complaints and, eventually, lawyers.
Price your annual plan properly
Find the annual discount that still beats monthly churn, so you don't need a hidden fee to make the numbers work.
Why would a company hide a commitment?
Because the numbers look better.
A monthly price on an annual plan looks cheap. And a fee that keeps people from cancelling keeps churn down on paper. But that's not real retention. Those customers already wanted to leave. You're just charging them for the privilege.
There's a better way to make the annual plan work: make it genuinely attractive. Price the annual discount so it beats your monthly churn, and customers choose the commitment because it's a good deal. The annual vs monthly guide walks through the math, and the annual discount calculator does it for you.
Does this matter outside the US?
Yes.
The same principle runs through every market. In Australia (general information, as at October 2026), the ACL already bans misleading conduct, an exit fee in a standard form contract can be challenged under the unfair contract terms rules, and from 1 July 2027 the subscription rules require key terms, including the contract period and how to end it, to be shown prominently at sign-up. The Australian cancellation rules guide has the detail.
And in the US, the Adobe case shows that even with the FTC's click-to-cancel rule struck down, enforcement under older laws carries on. (See how the click-to-cancel rule died and changed nothing.)
What can you steal from Adobe's mistake?
- Put the commitment in the headline. If you offer a 12-month plan billed monthly, write "12-month commitment" and the exit fee next to the price, not behind a hyperlink.
- Don't pre-select the committed plan. Let customers choose it.
- Send a reminder before any trial converts to a committed plan. Adobe's proposed order would require it.
- Make early exit fees proportionate, and explain the calculation in one sentence. Charging back the annual discount is simple and fair.
- Make cancelling easy, even when a fee applies. Tell them the fee, then let them go.
For a deeper look at the model, read minimum commitment pricing, and see how Adobe prices today in our Adobe pricing teardown.
What to do next
Open your checkout page. Find your commitment and your exit fee. Could a new customer see both without clicking anything?
If not, fix that today. Then check the rest of your flow.
AU Subscription Compliance CheckerCheck your sign-up and cancellation flow against the new Australian rules.Open the free tool →Frequently asked questions
Are early termination fees legal?
In many places they can be, if they're clearly disclosed before purchase and reasonable. The Adobe case was about the fee allegedly being hidden, not about fees existing. In Australia, an exit fee in a standard form contract can also be tested under the unfair contract terms rules, and from July 2027 subscription businesses must make cancelling straightforward. Get advice on your terms.
What's the difference between annual paid monthly and monthly?
A monthly plan can be cancelled at the end of any month. An annual plan paid monthly is a 12-month commitment, split into monthly installments, so leaving early usually costs something. Both are legitimate. The problem comes when customers think they're on the first and discover they're on the second.
How should I calculate a fair early exit fee?
Base it on what an early exit actually costs you: the discount the customer got for committing, setup work you haven't recovered, or a portion of the remaining term. Explain it in one sentence on the checkout page. Many businesses simply charge back the annual discount, which feels fair to customers and is easy to explain.
Did Adobe admit wrongdoing?
The Department of Justice's announcement describes the government's claims as allegations, and the settlement was filed as a proposed order that takes effect only once the court enters it. Settlements like this commonly resolve a case without a finding by the court. Read the DOJ's release for the official description.
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Robert Coorey, MBA
Robert is the author of The Subscription Playbook and Feed a Starving Crowd and a Director at BPAG Accountants in Sydney. More about Robert.
Sources
- US Department of Justice, Adobe Agrees to $150 Million Settlement and Injunction (13 Mar 2026)
- FTC, FTC Takes Action Against Adobe and Executives for Hiding Fees, Preventing Consumers from Easily Cancelling (Jun 2024)
- FTC, Adobe, Inc., U.S. v. case page
- Truth in Advertising, Adobe Settles DOJ Lawsuit over Deceptive Subscription Practices (2026)
- Compliance Week, Adobe agrees to $150M settlement over alleged cancellation fee violations (Mar 2026)
Facts and prices checked 27 October 2026. Spotted something out of date? Tell us.