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Adobe’s $20B Figma deal fiasco: Will Adobe own the design software market?

Adobe's $20B Figma deal fiasco
Picture credits: bilalulker/DepositPhotos

In a move that could significantly reshape the design software landscape, Adobe, a global leader in creative software, announced its intention to acquire Figma, a popular cloud-based design platform, for a staggering $20 billion in September of last year. 

This proposed acquisition has now attracted the attention of regulatory bodies worldwide, who are carefully scrutinising its potential impact on competition.

Why the European Commission is Raising Concerns over Adobe’s Market Dominance

At the heart of the European Commission’s concerns lies Adobe’s already formidable presence in the design software market. With its portfolio of industry-leading tools like Photoshop and Illustrator, Adobe wields significant influence. The acquisition of Figma would further solidify its position, raising questions about fair competition.

Potential Harm to Innovation and User Costs

The European Commission is also apprehensive that Adobe’s expanded dominance could stifle innovation and lead to increased costs for design software users. The potential for restricted competition could hinder the development of cutting-edge solutions and place a financial burden on end-users.

Possible Outcomes: Approval, Conditional Approval, or Blockage

As the European Commission reviews the acquisition, several potential outcomes could unfold:

  • Approval without Conditions: If the Commission finds no significant threat to competition, the deal could proceed as planned.
  • Approval with Conditions: The Commission may approve the deal with conditions, such as requiring Adobe to license Figma to other companies, to safeguard competition.
  • Blockage of the Deal: In the most drastic scenario, the Commission could block the acquisition altogether to protect competition in the design software market.

Global Regulatory Spotlight: U.S. DoJ and U.K. Investigations

The Adobe-Figma deal has also captured the attention of regulatory bodies beyond Europe. In the United States, the Department of Justice (DoJ) is conducting an in-depth investigation into the potential for a “substantial lessening of competition” due to the merger.

Similarly, the United Kingdom’s Competition and Markets Authority (CMA) has launched a deeper probe into the acquisition, citing similar concerns. This global regulatory scrutiny underscores the far-reaching implications of the deal.

How does the EU have a say in this deal?

While the Adobe-Figma transaction initially did not trigger EU merger regulations’ turnover thresholds, it found its way to the European Commission under Article 22. This article empowers individual EU member countries to refer cases if they believe a transaction could undermine competition in their markets.

In a collaborative effort, more than a dozen EU member countries collectively referred the deal to the Commission under Article 22. This highlights the flexibility and collaborative nature of the European regulatory landscape.

How will this shape the future of market and regulatory bodies

As the Adobe-Figma acquisition undergoes rigorous examination globally, the implications extend far beyond a business transaction. The involvement of the U.S. DoJ, the United Kingdom, and the European Commission underscores the global nature of the software market and the shared commitment to preserving fair competition.

While the outcome of these investigations is expected in December 2023, it will undoubtedly shape the future landscape of the design software industry, setting a precedent for regulatory responses to high-profile mergers in the ever-evolving technology sector.

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