Adobe’s $20bn Figma deal set for full UK antitrust probe

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Adobe’s $20bn acquisition of its smaller rival Figma is on course for a full antitrust investigation in the UK, after the competition regulator said it feared the combination would reduce innovation and increase costs.

The deal, which was announced in September, is facing scrutiny from US and European antitrust authorities.

Adobe and Figma are competitors in the market for software that is used to design digital apps and websites, with the start-up increasingly challenging the Photoshop maker’s broader suite of image, video and animation tools.

In an initial investigation, the UK’s Competition and Markets Authority found that this rivalry has boosted investment and innovation in design software, which could be lost if the companies merged.

“We’re worried this deal could stifle innovation and lead to higher costs for companies that rely on Figma and Adobe’s digital tools — as they cease to compete to provide customers with new and better products,” said Sorcha O’Carroll, senior mergers director at the CMA.

The agency said it planned to refer the deal for a full “phase 2” investigation unless the two companies offered “acceptable undertakings” within the next five days in response to the issues it had raised.

Adobe indicated it had no such plans and would instead argue its case in the next stage of the CMA’s investigation, saying: “We look forward to establishing these facts in the next phase of the process and successfully completing the transaction.”

The Financial Times reported this month that the deal is set to face a lengthy antitrust investigation in the EU. The US Department of Justice is also reportedly preparing a lawsuit attempting to block the transaction.

The UK has become increasingly active on the global regulatory stage. Friday’s move adds another multibillion-dollar tech deal to the CMA’s caseload, which has opened probes into Microsoft’s $75bn Activision Blizzard takeover and Broadcom’s $69bn purchase of VMware. It recently cleared Amazon’s $1.7bn deal with iRobot, a maker of automated vacuum cleaners, following a short investigation.

Shantanu Narayen, Adobe’s chief executive, told the FT this month that if regulators made it harder for big companies to buy smaller rivals, it would create a “significant disincentive for people to invest in new start-ups”. Executives at Microsoft and Activision Blizzard have criticised the CMA’s approach after it blocked their deal in April and are appealing against the decision.

Adobe said on Friday that its combination with Figma would make product design “more accessible and efficient”, pointing to “overwhelmingly positive feedback from customers worldwide”.

“We remain confident in the merits of the case as Figma’s product design is an adjacency to Adobe’s core creative products and Adobe has no meaningful plans to compete in the product design space,” Adobe said.

Figma also said that the two companies could “deliver far more value for designers, creators and knowledge workers together than either company could deliver on its own”.

“We believe strongly that our proposed combination with Adobe will not result in any reduction of competition in our respective markets,” Figma said.

“We look forward to continued conversations with the CMA focused on the benefits a combined Adobe-Figma entity will bring,” it added.