UK shares concerns over Adobe’s $20 bn acquisition of Figma

British competition regulator, the Competition and Markets Authority (CMA), has expressed concerns over Adobe’s $20 billion acquisition of designer platform Figma, stating that it could potentially hinder innovation and reduce competition.
Adobe Max
Unless the parties involved provide satisfactory solutions to address these concerns, the deal may undergo a Phase 2 investigation, CMA said.

CMA initiated an inquiry into the acquisition in May 2023 after the deal was announced in September 2022. The regulator identified potential issues regarding the availability of screen design software, an area in which both companies compete, which could limit options for designers of digital apps, websites, and other products.
Sorcha O’Carroll, Senior Mergers Director at the CMA
Sorcha O’Carroll, Senior Mergers Director at the CMA, expressed apprehension about the acquisition’s impact, emphasizing the potential suppression of innovation and increased costs for companies relying on Figma and Adobe’s digital tools.

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Adobe, a renowned global software developer, specializes in various creative tools, including industry-standard applications like Photoshop and Illustrator, enabling customers to create and modify images, videos, motion designs, and interactive content.

On the other hand, Figma is a leading provider of screen design and whiteboarding tools, which have become essential for designing digital products and services such as applications and websites.

The CMA has identified concerns specifically in the supply of screen design software, where Adobe and Figma offer competing products. Figma has gained a significant market share in this segment, while Adobe has been actively investing in and competing within this space. The competition between Figma and Adobe has spurred investments in updating and advancing screen design software, and the potential acquisition raises the risk of losing this crucial rivalry.

Additionally, concerns have emerged regarding the provision of creative design software, where Adobe currently offers leading tools for image, video, and animation content. Figma, however, poses an emerging competitive threat to Adobe across these tools, with the potential to expand its offerings and impose a stronger constraint on Adobe’s market presence.

The software products provided by Adobe and Figma are relied upon by numerous startups and businesses for developing apps, websites, and engaging content. In 2022 alone, the UK app economy was valued at £19.4 billion. If Adobe’s acquisition of Figma proceeds, it would remove a key player from the market and diminish both companies’ incentives to invest in software development and compete with each other. This could lead to higher costs for businesses and result in fewer and less innovative product offerings.

The CMA’s scrutiny of the deal reflects concerns about preserving competition and fostering innovation within the digital design sector.

 

Adobe has a window of five working days to propose measures to address the CMA’s concerns.

In response, Adobe claimed that it does not have substantial plans to compete in the product design sector and remains confident in the merits of the case, as Figma’s product design is seen as complementary to Adobe’s core creative products.

Figma also responded, stating that they firmly believe the merger with Adobe will not result in reduced competition within their respective markets.

The CMA’s recent decision to block Microsoft’s acquisition of videogame maker Activision Blizzard, citing concerns over potential negative effects on competition in the emerging cloud gaming industry, has sparked controversy.

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