The Adobe-Figma deal is likely to attract antitrust scrutiny

The Adobe-Figma deal is likely to attract antitrust scrutiny

The Adobe-Figma deal is likely to attract antitrust scrutiny

Some users of Figma’s design software reacted with dismay on Thursday when they found out the company was going to be acquired by Adobe, the unloved giant in the space. Other observers immediately concluded that the acquisition looks downright illegal under antitrust laws.

Why it’s important: The Biden administration is on record as wanting to strengthen antitrust enforcement. The Figma deal, at $20 billion, is certainly big enough to catch the attention of regulators. The big question is whether they will conclude that suing to block it is a case they can win.

  • Either the Department of Justice or the Federal Trade Commission can review the merger; both have seen a renewed interest in software and digital fusion.

Between the lines: The Clayton Antitrust Act states that any acquisition that would reduce competition in an industry is illegal.

  • Figma was founded as an Adobe competitor and has grown impressively by doing just that – suggesting there’s a case to be made that this acquisition is anti-competitive.
  • To the extent that Adobe is already the dominant player in the space, some acquisitions, let alone a $20 billion one, will be closely watched.

What they say: “The fact that Adobe is not typically identified as a Big Tech platform should provide [Adobe and Figma] with little or no consolation,” Charles Rule, a partner at the law firm Rule Garza Howley and former DOJ antitrust official, told Axios.

  • “This deal seems to raise simple, traditional antitrust issues,” he says.
  • “There’s enough here to take a closer look, and maybe a complaint,” adds a former FTC antitrust official.
  • Another former FTC attorney tells Axios to expect a thorough initial investigation into possible overlaps.

For the record: “The combination of Adobe and Figma will greatly benefit consumers,” Adobe said in a statement. “We expect the transaction to close in 2023, subject to receipt of necessary regulatory approvals and clearances.”

How it works: Once Figma becomes part of Adobe, it may be more free to raise prices, as it will no longer be driven by the need to win business away from Adobe.

  • Conversely, Adobe will also have more freedom to raise the prices of its own legacy software, since if users flee to Figma, they will still remain Adobe customers.

The big picture: Both FTC Chair Lina Khan and DOJ Antitrust Chief Jonathan Kanter have been very open about wanting to go after Big Tech.

  • What’s not clear is whether Adobe, with a market cap of $138 billion, is big enough to really count as Big Tech in their eyes— or whether the regulators would be able to use their strained resources to comply with this agreement.
  • Moreover, it is extremely difficult to block a software deal: even defining the relevant market is difficult thanks to the malleability of the software itself.

Bottom line: Today’s antitrust enforcers, with the benefit of hindsight, regret letting past tech deals slip through — notably Facebook’s acquisition of onetime creative upstart Instagram. They don’t want to make the same mistake twice.

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