Adobe cancels €18bn Figma acquisition over antitrust concerns

US companies Adobe and Figma decided on Monday (18 December) to call off a €18 billion merger they had been foreseeing for 15 months following concerns from regulators in the EU, UK and US.

Announced on 15 September 2022, Adobe, a global software company renowned for its creative design tools such as Photoshop and Illustrator, would have acquired Figma, a provider of web-based collaborative tools for product design.

The European Commission, the United Kingdom’s Competition Markets Authority, and the US Department of Justice all took an interest in the merger, concerned it could negatively impact the market for graphic design software.

“By combining these two companies, the proposed acquisition would have terminated all current and prevented all future competition. Our in-depth investigation showed that this would lead to higher prices, reduced quality or less choice for customers,” reacted Margrethe Vestager, executive vice-president in charge of competition, after announcing the deal’s cancellation.

The European Commission, which has exclusive competence to establish competition rules for the functioning of the EU single market, was notified by the two companies at the end of June of the transaction, following a request by 16 member states, including the largest ones, to conduct an assessment under the EU Merger Regulation rules.

It concluded in mid-November by sending Adobe and Figma a statement of objection over the merger.

The statement read that the Commission’s preliminary conclusions were that the transaction may significantly reduce competition in the global markets for the supply of interactive product design, where Figma is a global market leader, and of vector editing and raster editing tools, where Figma is a potential competitor to Adobe’s market lead.

Similarly, on 14 December, the British Competition Markets Authority warned that “no remedy package that preserves the core features of the transaction will be sufficient to resolve [Adobe and Figma]’s competition concerns relating to interactive product design and vector editing and raster editing.”

The Commission had until early 5 February 2024, and the British authority until 25 February 2024 to deliver their final decisions. However, the fact that the merger was called off indicates that the two companies could not develop potential remedies to satisfy the regulators’ concerns.

Regulators were expecting “significant concessions in the form of a structural divestment to clear the deal, and that was not a price Adobe could pay,” said Alex Haffner, competition partner at the UK law firm Fladgate. 

Dylan Field, co-founder and CEO of Figma, explained that “despite thousands of hours spent with regulators around the world detailing differences between our businesses, our products, and the markets we serve, we no longer see a path toward regulatory approval of the deal”.

“Adobe and Figma strongly disagree with the recent regulatory findings, but we believe it is in our respective best interests to move forward independently,” said Shantanu Narayen, chair and CEO of Adobe.

Yet, Adobe and Figma did not close the door to the idea of partnering in the future, according to the public statements that announced the failure of the marriage. Still, Adobe will have to pay a $1 billion penalty for failing to fulfil the agreement.

“It is important in digital markets, as well as in more traditional industries, to not only look at current overlaps but to also protect future competition,” Vestager said.

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