The European Commission says Adobe's proposed $20 billion purchase of web-first design collaboration startup Figma will harm competition in the region unless the pair devise remedies to resolve this.
The transaction would represent the most expensive sale of a privately owned software company in history, and was flagged as a concern by 16 member states of the European Union in February, such is the lack of credible alternatives to Adobe on the market.
The EC leaned in for an in-depth investigation of the merger in August, and late on Friday evening - in the Euro time zone - it delivered the damning preliminary verdict in a Statement of Objections.
"As a result of this in-depth investigation, the commission reached the preliminary conclusion that the transaction may significantly reduce competition in the global markets," the EC said.
There are two elements for the objection: Figma is the "clear market leader" in interactive product design tools and Adobe is "one of its largest" rivals, meaning the "transaction is likely to create a dominant player by combining these market positions."
"Furthermore, it will result in the discontinuation of Adobe's own interactive product design tool, Adobe XD, as well as any potential successor product and thus constitute a so-called 'reverse killer acquisition'."
By erasing Figma as a competitive hurdle, Adobe would also tighten its grip on the supply of vector and raster editing tools, the EC added.
"Figma already exerts a significant constraining influence on Adobe's vector editing tool, Adobe Illustrator, as well as on Adobe's raster editing tool, Photoshop. Moreover, absent the transaction, Figma is significantly likely to enter these markets and grow into an effective competitive force," it said.
To reach this stage, the regulators have worked with other competition authorities and collated the views of competing companies and customers. In outlining the Statement of Objections, Adobe and Figma now have the chance to respond, to look over the case file, and to demand an oral hearing.
The sale was first announced in September 2022, and served to unsettle some developer customers of Figma, ones that were worried Adobe would kill off the free version, or its own XD software, anxiety the clearly EC shares.
Figma has four million users, including a little under 1,000 paying customers. The vector-based graphic editor and prototyping toolmaker was founded in 2016 and has taken in around $330 million funding to date.
The EU's regulator isn't the only one taking a keen interest in the $20 billion merger; the UK's Competition and Markets Authority and the Department of Justice's antitrust team are also inspecting the proposal. The CMA said last month it needs more time to consider the "complex case."
Adobe had wanted to get the deal done by the close of this calendar year but that is now definitely not going to be the case, with the case files to be publicly updated in February.
In October, Adobe told us of the CMA investigation: "We remain confident in the merits of the case as Figma's product design is an adjacency to Adobe's core creative products and Adobe has no meaningful plans to compete in the product design space."
"We look forward to establishing these facts in the next phase of the process and successfully completing the transaction," a spokesperson told us at the time.
We asked Adobe to comment today on the latest twist. ®
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