US Lawsuit Casts a Dark Shadow over Adobe’s $20 Billion Bid for Figma, Foreshadowing Possible Blockade

The US Department of Justice reportedly plans to file an antitrust lawsuit to prevent Adobe Inc. from paying $20 billion for the startup company Figma Inc. According to some reports, the case could be filed with knowledge of the circumstances as soon as next month, but the timetable is subject to change. The sources consented to talk on the condition of anonymity due to the nature of the investigation.

Adobe executives apparently had a meeting with the DOJ yesterday to discuss the matter, but the facts of the conversation have not been made public.

The merger agreement’s terms allow for a regulatory review process that may continue until March 2024. Many antitrust agencies must approve the intended acquisition. The transaction could, however, be fully stopped by the DOJ’s move. 

The European Union (EU) and the United Kingdom’s antitrust regulators are now looking into the proposed merger of two enterprises (UK). In attempt to follow requests from national authorities, the EU antitrust authority looked into the proposed acquisition to check for any potential competition-related problems. The UK Competition and Markets Authority is also looking into the merger, and the investigations of the three agencies are coordinated.

The decision to combine was made after the companies announced their intention to do so, which raised concerns about how it would impact consumer welfare and competition. The assessment will consider whether the merger will give the new entity a monopolistic market position, giving it the ability to control pricing, hinder innovation, or limit consumer choice.

Antitrust laws were developed to prevent companies from monopolising entire markets and to guarantee that customers can choose from a variety of goods and prices. EU and UK regulators will closely examine the proposed combination to ensure that antitrust laws are upheld and consumer interests are protected.

The companies may be required to make some changes, or the merger may even be completely stopped, if the antitrust authorities determine that the proposed merger could harm competition. To persuade authorities to approve the combination, the corporations will need to present proof that it won’t hurt consumer welfare or competition.

Antitrust authorities are currently looking into the proposed merger between the two businesses in the EU and the UK. The assessments will look at whether the merger complies with antitrust regulations and protects consumer interests.

The US Department of Justice’s antitrust division is worried that one of the biggest acquisitions of a privately held software company, Adobe’s proposed acquisition of Figma, may have violated antitrust rules. The division is worried that the purchase may restrict the possibilities for design tools used by creative people. Under President Joe Biden, the division has taken a more strong position towards mergers.

While Figma is mostly used to develop user interfaces for apps or websites, Adobe has long been the market leader in design professionals’ tools like Photoshop and Illustrator. Adobe’s purchase of Figma is a substantial bet that more creative work will be done online by small businesses and average individuals. In recent years, Figma has beaten Adobe’s competitor XD application.

Adobe has argued that the acquisition is not anticompetitive because Figma is not a rival to important software tools like Photoshop or Premiere, which are used for photo editing and video cutting, respectively.

Nonetheless, the deal has already drawn comparisons to Meta Platforms Inc.’s purchase of Instagram in 2012, another acquisition of a small but rapidly expanding rival by the market leader that poses a danger to the status quo.

Figma users are worried that the acquisition would restrict innovation or raise prices. Adobe has pledged to keep the software’s free-use tier intact and not change the way Figma is currently being developed. If Dylan Field, the CEO of Figma, stays at Adobe for four years, he will receive a total stock agreement worth almost $1 billion.

Adobe tried to buy Figma in 2020 and 2021 before making a successful proposal in 2022 that twice the company’s current valuation. The hefty price was viewed by Wall Street experts as evidence of Adobe facing fierce competition.

Figma tried to get a bid from Microsoft Corp. before deciding to accept Adobe’s offer. A representative for Adobe said that the company is still on track to complete the acquisition in 2023 and that there are “constructive and cooperative negotiations” taking place with regulators in the US, UK, and EU, among other places.

After being compelled to give up a program that was directly in competition with its Illustrator graphic design tool as part of a merger with Aldus Inc. in the 1990s, this litigation represents Adobe’s most significant antitrust struggle.

The company was the focus of a second Justice Department investigation when it bought Macromedia’s web development software suite in 2005, but the transaction was ultimately approved without any legal issues. Justice Department representatives declined to comment.

Investor concern over Adobe’s proposed acquisition of Figma, a provider of design tools, caused its shares to drop more than 7% on Wednesday. This time around, as opposed to when the acquisition was first made public in September of last year, Adobe’s shares rose on the announcement.

With the reported $20 billion purchase of Figma, Adobe will have access to one of the most well-liked tools available for designing user interfaces. By the middle of 2021, more than 4 million people were using Figma’s interface design platform, and well-known internet behemoths like Dropbox, Stripe, and Google were among its users.

Figma’s broad prototyping features, which minimize the amount of manual labor necessary in the prototyping process, are one of the factors contributing to its popularity. Figma automates a large portion of the extra tasks required for fine-tuning interface components during the development stage, when designers may produce several iterations of graphic elements.

By allowing designers to accomplish tasks like animating a button using a drag-and-drop interface, Figma also eliminates the need for code. Compared to hand-coding programs, this is far faster.

Adobe’s position in the market for creative products will be strengthened if the acquisition is successful. Last year, the company’s Creative business, which sells goods like Photoshop, brought in $10.46 billion.

edited and proofread by nikita sharma