Adobe's Figma acquisition could harm innovation, UK regulator
CMA's investigation says $20bn deal could sqash competition to Photoshop and Illustrator
The UK's Competition and Markets Authority (CMA) has provisionally found that Adobe's proposed $20 billion acquisition of cloud-based design platform Figma could have detrimental effects on innovation within the digital design sector in the UK.
The regulator's extensive phase 2 investigation revealed that the deal might squash competition, reduce innovation, and remove Figma as a threat to Adobe's flagship products, Photoshop and Illustrator.
The CMA said it would explore potential remedies, including the possibility of blocking the acquisition altogether.
The regulatory scrutiny adds another layer of complexity to Adobe's plans, which have also been under investigation by the US Department of Justice and the European Union.
Adobe announced its proposal to acquire Figma for $20 billion in September last year, with CEO Shantanu Narayen stating that the partnership would be "transformational".
Adobe's offer price for Figma was twice the valuation that Figma had received in its most recent private funding round in 2021 and ten times its valuation in 2019.
The bid placed the company's value at 50 times its annual recurring revenue.
Figma, known for its collaborative design platform for app and website development, is considered a significant player in the market. The company's product design software is integral to the digital design sector, with around 80% of the professional product design market in the UK relying on Figma's tools.
The sector itself is valued at nearly £60 billion, contributing 2.7% to the UK economy and employing over 850,000 highly skilled professionals.
The CMA's phase 2 investigation was launched in July after Adobe failed to provide concessions to alleviate the regulator's worries.
"Our provisional conclusion is therefore that the merger would remove competition between close competitors and an important competitive constraint on Figma, in a market in which Figma is already the strongest player by far and there are few other competitive constraints," the CMA said in a press release this week.
The competition watchdog said it is open to consultations with interested parties before making a final decision on the matter.
The CMA has requested responses from both Adobe and Figma by 19th December, with a final decision expected to be issued by 25th February next year.
Possible remedies under consideration by the CMA include prohibiting the merger entirely or the divestiture of "overlapping operations" in markets where the deal could substantially reduce competition.
This regulatory setback isn't exclusive to the UK, as the European Union also issued Adobe a formal antitrust complaint earlier this month, raising similar competition concerns. In addition, the US Department of Justice was reported to be preparing to sue Adobe to block the deal, indicating a broader international scrutiny of the acquisition.
Despite the regulatory challenges, both Adobe and Figma remain committed to the deal.
Adobe, expressing its disappointment with the CMA's perspective, highlighted its belief that the combination of Adobe and Figma would provide significant value to customers.
"We are reviewing the provisional findings and will re-engage with the CMA on the facts and merits of the case," stated Adobe in response.
Adobe's chief counsel, Dana Rao, acknowledged earlier this month that the company was willing to propose remedies to address regulatory concerns.
A representative for Figma expressed disappointment and strongly disagreed with the notion that Figma competes with Adobe, both presently and in the future.
"We remain committed to the deal, confident in the facts, and convinced our proposed combination with Adobe is a win for consumers and should be approved," the company spokesperson said.