CMA Finds $20 Billion Adobe Figma Deal Could Harm UK Digital Design

Image credit: Figma

Provisional finding from the UK antitrust regulator, the CMA, puts Adobe’s $20 billion acquisition at risk

The UK’s Competition and Markets Authority (CMA) has reached a provisional finding about Adobe’s troubled purchase of Figma.

On Tuesday the CMA announced that it had provisionally found that Adobe’s deal to buy Figma would likely harm innovation for software used by the vast majority of UK digital designers.

The CMA had announced in June that it would conduct a phase two investigation of Adobe’s $20 billion (£17.5bn) deal to acquire design collaboration firm Figma, announced in September 2022.

Image credit: Figma
Image credit: Figma

Competition concerns

The acquisition immediately triggered competition concerns, and the UK’s CMA is not the only regulatory body that has concerns, after the European Commission a few weeks ago issued its own ‘statement of objections‘ to the deal.

It comes after the European Commission began its in-depth investigation of the deal back in the summer of 2023. It will make its final decision on 5 February 2024.

The US Justice Department is reportedly also preparing a lawsuit to block the merger.

The Figma deal had raised concerns that Adobe would gain “a real stranglehold on design software”.

Prior to the Figma acquisition, Adobe’s biggest-ever deal had been its $4.75bn acquisition of Marketo in 2018.

However the Figma acquisition will result in Abode acquiring one of its biggest potential rivals, a competitor to its Adobe XD vector design tool and a pioneer in building sophisticated design apps that run directly in a web browser.

Figma was founded in 2012 after its co-founders Dylan Field and Evan Wallace dropped out of Brown University at age 19 to accept a $100,000 grant from libertarian financier Peter Thiel.

The offering allows online collaboration on interface and user experience design and in addition to the web app offers offline tools for macOS, Windows, Android and iOS, with a feature set that includes vector graphics editing and prototyping tools.

Along with Australian start-up Canva, Figma is a leader in a new generation of browser-based design tools that have changed the game in an industry that has long been dominated by Adobe.

Provisional ruling

Into this comes the UK objection to the deal, after the CMA found that the $20bn deal would:

eliminate competition between two main competitors in product design software
reduce innovation and the development of new competitive products
remove Figma as a threat to Adobe’s flagship Photoshop and Illustrator products

The CMA said that more UK businesses than ever rely on design software to help present their products and services via websites and apps, with the CMA’s investigation finding that around 80 percent of the professional product design market use Figma’s software.

The CMA’s investigation provisionally found that, 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 regulator said that “in the course of a detailed Phase 2 investigation, led by an independent group, the CMA has provisionally found the deal will eliminate competition between these two key competitors in the following three software markets: product design; image editing; and illustration.”

“The digital design sector is worth nearly £60 billion to the UK – representing 2.7 percent of the national economy – and employs over 850,000 people in highly skilled work,” said Margot Daly, chair of the independent group conducting this investigation.

“The software this sector uses is pivotal to its success, so the CMA has from the outset been very focused on ensuring this merger doesn’t adversely affect such an important part of the UK economy,” said Daly.

“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 Daly. “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.”

“Today’s decision is provisional, and we will now consult on our findings and listen to any further views before reaching a final decision,” said Daly.

The CMA will consult on its provisional findings, alongside potential remedies to the competition concerns identified.

The CMA said it welcomes responses from interested parties by Tuesday 19 December 2023.

These will be considered ahead of the inquiry group issuing its final decision by 25 February 2024.

Adobe is open to proposing remedies to resolve regulatory concerns, its chief counsel Dana Rao has told Reuters this week.

Adobe will reportedly defend the deal at hearing European authorities on 8 December.