Adobe’s $20 billion buy of web-first design collaboration start-up Figma will harm software developers if it goes ahead as proposed, according to a provisional ruling on the merger by Britain’s competition regulator.

The Competition and Markets Authority launched a deeper investigation of the tie-up in July when it classified Figma as an “emerging threat to Adobe”.

Now in the latest twist, the regulator says it found the merger would eliminate one of two major players in three software sub-markets: product design; image editing; and illustration.

Figma’s tools are used by well-known businesses that are key to the success of the digital economy, the CMA reckons, including Airbnb, Patagonia and Vodafone. Approving the acquisition “would remove the constraint Adobe exerts on Figma through its product design software, AdobeXD.”

The CMA adds in its report: “The inquiry group also provisionally concluded that Adobe abandoned development of new product design software which could have competed even more closely with Figma and, given the timing of the decision, did this as a consequence of the merger.

“This supports the CMA’s concern that this proposed deal would likely reduce innovation and the development of competitive new products.”

Some software developers are worried that Adobe would up the price of Figma’s subsciption post merger, something Figma denied would happen.

Figma offers a browser-based app that manages file organization by listing projects and related files in a dedicated format. It requires no installation, no patching and no updates. The company has an estimated four million users.

As for image editing and illustration software, the “threat posed” by Figma has fueled product development of Adobe’s Photoshop and Illustrator applications, including web versions, and this dynamic would be altered by the merger.

“This competition would be lost as a result of the transaction, harming designers and creative agencies who might have used these new tools or relied on future updates,” the CMA’s report adds.

The nature of the ruling is provisions., and the CMA will now consult of them and consider potential remedies “which could include blocking the deal outright”.

This is not the type of talk that Adobe execs will want to hear. The company’s top brass has talked endlessly about the benefits of a merger, and had planned to conclude the deal by the end of last month until the European Commission notified Adobe that it too had multiple concerns that must be addressed.

The EC has a new February deadline to conclude its own probe. And of course the Dept of Justice’s anti-trust team is also taking a keen interest in the $20 billion sale, which would be the most expensive for a private company in enterprise software history.

Alex Haffner, competition partner at UK law firm Fladgate, told us the EC and CMA are highlighting "broadly the same concerns".

"The challenge will now be for the merging parties to persuade the competition regulators that they have got the analysis wrong in their provisional assessments or, more likely, to come up with a package of remedies which can satisfy their stated concerns."

A spokespeson at Adobe sent us a statement: "We are disappointed in the CMA’s findings and disagree with the CMA’s perspective on this transaction. Adobe and Figma will deliver significant value to customers. We are reviewing the provisional findings and will reengage with the CMA on the facts and merits of the case." ®

https://www.theregister.com//2023/11/29/adobes_buy_of_figma_is/