UK readies in-depth investigation into Adobe’s $20B Figma acquisition

The U.K.’s Competition and Markets Authority (CMA) has provisionally concluded that Adobe’s proposed $20 billion bid for digital design rival Figma could result in a “substantial lessening of competition” in the U.K for designers.

As a result of its initial findings, the CMA is progressing the case to an in-depth “phase 2” investigation, albeit the parties concerned have five days to submit proposals that address the CMA’s concerns.

Multi-front investigation

Today’s announcement comes almost two months after the CMA first revealed it was looking into the merger that was first announced last September, inviting comments and submissions from relevant parties. Back in February, the European Commission (EC) also revealed it was assessing the acquisition on competition grounds, with early indications suggesting that a lengthy investigation is on the cards. And elsewhere, the U.S. Department of Justice (DoJ) is also reportedly readying a lawsuit to block the deal.

To many outside observers, the growing regulatory blockades to the Adobe/Figma merger is not a huge surprise, given that the deal would certainly remove a major rival from Adobe’s path.

In its findings published today, the CMA pointed to Adobe’s creative design software suite spanning illustrations, photos, videos, and animations, and compared it with Figma which it said offers “some basic creative design functionality as part of its screen design software” but lacks “advanced or standalone creative design tools.”

On the other hand, the CMA noted that Figma is the “largest supplier of all-in-one screen design software,” which can be used for web and app design, as well as digital marketing — markets in which Adobe operates.

While Adobe and Figma’s products are not like-for-like identical, the CMA has provisionally found that Adobe’s XD vector design tool “remains one of only a limited number of close alternatives to Figma.” On top of that, the CMA said that its investigation found that Adobe had been in the process of developing a new all-in-one design tool that included a range of features including whiteboarding, marketing, and product design, which it cancelled ahead of its merger announcement with Figma.

“The evidence suggests that Adobe’s efforts in product development were motivated, at least in part, by a desire to compete with Figma,” the CMA’s initial report notes. “Adobe’s internal documents regularly reference competing with Figma and compare planned features to those offered by Figma.”

In terms of standalone, purpose-specific creative design software, the CMA acknowledged that Figma is currently not a major Adobe competitor on this front, though it does offer some of this functionality in its screen-design product such as vector-editing. However, it also noted that Figma “has regularly explored” expanding its product suite into this realm through internal development or acquisitions.

“As a result, the CMA found that the merger would remove a significant competitive threat to Adobe from the market and result in a substantial lessening of competition,” it said.

An Adobe spokesperson said that combining Adobe and Figma will “deliver significant value to customers by making product design more accessible and efficient, reimagining creative capabilities on the web and creating new categories of creativity and productivity.”

The spokesperson also added that Adobe had no “meaningful” plans to compete with Figma in the broader product design realm, and that bringing Figma under its wing would be an “adjacency” to Adobe’s core creative tools.

So the long and short of all this is that the CMA is now likely progressing things to an in-depth phase 2 investigation, with Adobe and Figma given until July 7 to provide an acceptable resolution to the CMA’s concerns — however, it sounds as though Adobe isn’t planning on submitting anything ahead of this deadline.

“We look forward to establishing these facts in the next phase of the process, and successfully completing the transaction,” the spokesperson added.

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