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Adobe’s proposed $20bn merger with Figma would harm competition in product design software by uniting two of the main companies in the sector, the UK’s antitrust regulator has said in the latest challenge to the deal.
The acquisition in its current form would also threaten competition in image editing and illustration, the Competition and Markets Authority said in its provisional findings published on Tuesday.
The deal, which was announced in September 2022, values Figma at roughly 50 times its annual recurring revenue, and double its last private funding round in 2021. The huge price that Adobe is willing to pay for San Francisco-based Figma has been seen by critics of the deal as an effort to quash the software giant’s most promising new rival in decades.
“Adobe and Figma are two of the world leading providers of software for app and web designers and our investigation so far has found that they are close competitors,” said Margot Daly, chair of the independent group conducting the CMA’s investigation. “This proposed deal, therefore, has the potential to impact the UK’s digital design industry by reducing choice, innovation and the development of new competitive products.”
The companies can offer concessions to ease the authority’s concerns ahead of a final decision on whether to block the deal which is expected at the end of February.
This month, the European Commission, the EU’s executive body, published a statement of objections to the deal, following an in-depth investigation. Antitrust regulators in Brussels were concerned the merger could “significantly reduce competition in the global markets” for the supply of interactive product design tools.
The commission raised that the Adobe XD product design software would be discontinued in a “reverse killer acquisition”, where companies remove existing products in order to remove a competitor to a newly acquired service.
The CMA also highlighted XD as a main competitor to Figma, and concluded that Adobe had stopped its development of new product design software that would have competed even more closely with Figma as a direct result of the proposed merger.
Figma is the “world’s leading provider of product design software”, the CMA said, citing in its findings how it is used by well-known companies including Airbnb, Patagonia and Vodafone.
Both UK and European regulators have argued that Figma has the potential to become a future competitor to Adobe in image editing and illustration software, suggesting that the company would have developed rivals to Adobe’s Photoshop and Illustrator applications.
US regulators have yet to announce any action in relation to the acquisition.
“Without the merger, Figma would continue to take steps to develop or expand products that threatened Adobe’s position in image editing and illustration,” the CMA said.
Figma pushed back on the latter argument, saying it had not “spent a single dollar or hired a single engineer to build creative tools”.
“We are disappointed by the CMA’s provisional findings and strongly disagree with the assertion that Figma competes with Adobe today or has plans to do so in the future,” Figma said in a statement.
Adobe said the deal “will deliver significant value to customers”. It added that it was reviewing the findings and “will re-engage with the CMA on the facts and merits of the case”.
The CMA’s decisions in the tech space are facing scrutiny after Microsoft’s $75bn acquisition of Activision Blizzard was initially blocked by the regulator. While the watchdog ultimately gave its approval for the deal to go ahead last month, the back-and-forth led to some criticism that the CMA was potentially stifling transactions.