The UK’s competition watchdog, the Competition and Markets Authority (CMA), has completed its initial investigation into Adobe’s proposed $20 billion acquisition of cloud-based product design platform Figma. The CMA has raised concerns that the merger may result in a “substantial lessening of competition” for UK designers, as it would remove a “significant competitive threat to Adobe” from the market. To address these concerns, Adobe and Figma have until July 7th to propose “acceptable undertakings” or risk further investigation that could potentially derail the deal.
Sorcha O’Carroll, senior mergers director at the CMA, expressed worries about the potential negative effects of the deal. O’Carroll stated, “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. Unless Adobe can put forward viable solutions to our concerns in the coming days, we will move to a more in-depth investigation.”
In response to the CMA’s concerns, both Adobe and Figma have argued that Adobe is not a significant competitor to Figma in the all-in-one product design software market. The CMA’s summary of the decision recognized that Adobe had reduced investment in its own dedicated product design application, Adobe XD, before the merger. However, the CMA expressed concern that Adobe XD remains one of the few close alternatives to Figma, alongside services like Sketch.
Additionally, while Adobe XD is no longer generally available as a standalone product, the CMA found that Adobe had invested significantly in developing a new tool for whiteboarding, marketing design, and product design. However, this project was canceled shortly before the Figma acquisition was announced. Adobe claimed that the decision to cancel the project was unrelated to the merger. Nevertheless, the CMA argues that internal documents comparing planned features for the tool to those already provided by Figma suggest that Adobe had intended to directly compete with the company.
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The CMA’s investigation provides insight into the potential impact of the merger on the market for product design software. Figma has gained popularity among designers for its collaborative and cloud-based features, offering an alternative to Adobe XD and Sketch. The concern is that if Adobe acquires Figma, it could lead to a reduction in innovation and competition, resulting in higher costs for companies that rely on these tools for their design processes.
The CMA’s decision puts pressure on Adobe and Figma to propose solutions that would address the watchdog’s concerns and prevent the need for a more in-depth investigation. If they fail to provide satisfactory undertakings, the acquisition faces the risk of being blocked entirely.
The outcome of this investigation has broader implications for the technology and design industries. Mergers and acquisitions are common practices in the tech sector, as companies seek to expand their capabilities and market share. However, regulatory bodies like the CMA play a crucial role in ensuring that such deals do not harm competition and consumer welfare.
The CMA’s scrutiny of the Adobe-Figma merger reflects a growing focus on the potential impact of consolidation in the tech industry. As more companies consolidate their power through acquisitions, concerns about monopolistic practices and anti-competitive behavior have grown. Regulators aim to strike a balance between fostering innovation and protecting fair competition.
In conclusion, the CMA has expressed concerns about the potential merger between Adobe and Figma due to its potential impact on competition in the product design software market. The watchdog has given Adobe and Figma until July 7th to propose solutions that address its concerns. The outcome of this investigation will shape the future of the merger and have broader implications for competition and innovation in the technology and design industries.
