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UK watchdog slams the brakes on Adobe’s $20 billion bid for Figma

UK watchdog slams the brakes on Adobe’s $20 billion bid for Figma

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The CMA has provisionally concluded that the deal would eliminate competition in design software markets unless Adobe chooses to divest its ‘overlapping operations.’

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An illustration containing black Adobe logos in front of white Figma logos on a red background.
Adobe and Figma have until December 19th to respond with potential remedies.
Illustration by Kristen Radtke / The Verge

Adobe’s conquest of the creative software industry appears to be facing some difficulties following an in-depth investigation by the UK’s competition watchdog. The Competition and Markets Authority (CMA) has provisionally determined that Adobe’s proposed $20 billion bid for the cloud-based product design platform Figma would harm the product design software market and has effectively blocked the deal until competitive concerns are addressed. 

The CMA announced its findings on Tuesday, saying that if the deal goes ahead in its current form, it would eliminate competition in the software markets for product design, image editing, and illustration. Figma is considered to be one of Adobe’s biggest competitors in the design software market, with the CMA adding that a merger between the companies would “remove Figma as a threat to Adobe’s flagship Photoshop and Illustrator products.”

Figma, alongside its FigJam whiteboarding application, is more focused on UX, prototyping, and product design than digital illustration, photo editing, and graphic design, but until recently, it was directly competing with Adobe within the UX and product design market. Earlier this year, Adobe removed the ability to purchase its own product design software, Adobe XD, as a standalone app and abandoned the development of a new product design service it was working on. The inquiry group leading the CMA’s investigation believes Adobe did this as “a consequence of the merger.”

The CMA says that possible remedies it’s considering include either prohibiting the merger entirely or the divestiture of “overlapping operations” in each market where the deal could cause a substantial lessening of competition (SLC) — in other words, where removing Adobe’s rivals leaves consumers with fewer options. Potential areas of interest for the CMA include all-in-one product design software, vector editing software, and raster editing software. The CMA will also be open to suggestions from either party, but the watchdog is essentially telling Adobe that it can’t have Figma while it already owns apps like Illustrator and Photoshop. But even if Adobe were willing, separating two of its most popular apps from its Creative Cloud service (which reached almost 30 million paid subscribers last year) is no easy feat.

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

The findings of this investigation aren’t final — this is a provisional verdict that just informs Adobe and Figma of the precise issues preventing the deal from being approved. Still, the remedies proposed by the CMA don’t give Adobe much wiggle room. The next steps involve the CMA consulting on both its findings and potential remedies. Figma and Adobe now have until December 19th, 2023, to respond to the CMA’s findings ahead of the inquiry group issuing its final decision by February 25th.

The UK’s CMA isn’t the only regulatory body scrutinizing Adobe’s bid for Figma. Earlier this month, the EU issued Adobe with a formal antitrust complaint over similar competition concerns. Bloomberg also previously reported back in February that the DOJ was preparing to sue Adobe to block the deal.