EU Regulator’s Concerns Threat Adobe’s $20 Billion Bid for Figma

Adobe’s proposed $20 billion acquisition of cloud-based design platform Figma is facing significant challenges as European Union (EU) antitrust regulators prepare to launch a formal investigation. 

The move comes amid concerns over potential market consolidation, reduced innovation, and higher prices. 

EU Antitrust Probe: A Lengthy Investigation

According to individuals familiar with the matter, European antitrust regulators are poised to initiate a comprehensive investigation into Adobe’s acquisition of Figma later this year, Financial Times reported. While many large acquisitions undergo a standard “phase 1” investigation, which typically lasts a few weeks, EU authorities are reportedly planning to proceed with a more detailed “phase 2” investigation. Such an inquiry could extend over several months and potentially jeopardize the deal’s completion. This development marks another setback for the proposed acquisition, as it faces scrutiny from regulators worldwide.

Global Watchdogs’ Concerns

In addition to the EU, other regulatory bodies have expressed reservations about the Adobe-Figma deal. The United Kingdom’s competition watchdog initiated a preliminary probe into the acquisition last month, while the U.S. Department of Justice reportedly intends to file a lawsuit to block the transaction. The concerns raised by regulators worldwide reflect a broader apprehension over the consolidation of the digital design market and the potential elimination of smaller innovative competitors.

Figma’s Significance and Competitive Landscape

Figma, alongside Australia-based Canva, is a prominent provider of cloud-based design tools that offer enhanced performance compared to Adobe’s software suite, which includes the widely-used Photoshop. Figma’s market presence and growth potential have positioned it as a credible competitor to Adobe. Notably, the EU’s decision to subject this acquisition to antitrust scrutiny, despite Figma’s relatively low European sales, suggests apprehension over the transaction’s potential impact on competition in the interactive product design and whiteboarding software market.

The Killer Acquisition Concern

Insiders familiar with the EU’s thinking have raised concerns that Adobe’s acquisition of Figma falls under the category of a “killer acquisition.” This term refers to a large company purchasing a smaller rival to eliminate competition. The EU authorities perceive this move as detrimental to competition and innovation in the market.

Adobe’s Defense and Market Distinction

Adobe intends to argue that Figma operates in a distinct market from its own offerings. Internal research conducted by Adobe revealed that only a small proportion of Photoshop users also utilize Figma, indicating limited overlap in user bases. Adobe’s defense strategy aims to demonstrate that the two companies target different segments, thus mitigating concerns about market consolidation and reduced competition.

Remaining Steps and Outlook

As of now, Adobe has yet to formally present the acquisition for scrutiny by EU regulators. However, insiders close to the process suggest that the company can potentially avoid an in-depth investigation if it presents compelling evidence countering the authorities’ concerns in the coming months. Adobe remains confident in the merits of the deal and expects to successfully complete the transaction. The company is engaging in constructive discussions with regulators in the EU, the UK, and the US. Figma also looks forward to continued conversations with regulators.