Commission sends Adobe Statement of Objections over proposed acquisition of Figma

The European Commission has informed Adobe of its preliminary view that its proposed acquisition of Figma may reduce competition in the global markets for the supply of interactive product design software and of other creative design software.

Adobe is a global software company offering, among others, creative design software tools (e.g., Illustrator and Photoshop) and an interactive product design tool (Adobe XD). Figma is a provider of a web-based collaborative tool for interactive product design (Figma Design) as well as a whiteboarding tool.

Interactive product design software tools are used mainly to design websites, mobile applications, and other digital products. With creative design software, users can create or edit digital assets, such as photos (so-called ‘raster images’), graphic illustrations (so-called ‘vector images’) and videos.

The Statement of Objections

On 7 August 2023, the Commission opened an in-depth investigation to assess Adobe’s proposed acquisition of Figma and whether the transaction may affect competition in the global markets for the supply of interactive product design software, for vector editing software and for raster editing software.

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 for the:

• Supply of interactive product design tools where Figma is the clear market leader and Adobe one of its largest competitors. 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”.

• Supply of vector editing tools and supply of raster editing tools, by eliminating Figma as a potential competitor, thereby strengthening Adobe’s dominance in these markets. 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.

The Commission has conducted a wide-ranging investigation to understand the potential impact of the deal. This investigation has included, among others, analysing internal documents provided by the parties and gathering information and views from competing software providers and customers.

The Commission closely cooperated with other competition authorities during both the initial investigation and the in-depth investigation and will continue such cooperation during the remainder of the in-depth investigation.

Companies and Products

Adobe is a US global software company offering products that enable the creation and delivery of digital content, such as Photoshop, Illustrator, Premiere Pro and XD. Adobe has significant operations both worldwide and in all countries of the European Economic Area (‘EEA’). Adobe offers most of its tools standalone as well as in bundles, such as its so-called Creative Cloud Bundle.

Figma is a US global software company offering products for interactive product design, namely Figma Design (a collaborative design software) and FigJam (a whiteboarding tool).

Background

A Statement of Objections is a formal step in an investigation, where the Commission informs the companies concerned in writing of the objections raised against them. The sending of a Statement of Objections does not prejudge the outcome of the investigation. Adobe now has the opportunity to reply to the Commission’s Statement of Objections, to consult the Commission’s case file and to request an oral hearing.

The transaction was notified to the Commission on 30 June 2023 after being referred to the Commission by 16 countries in accordance with Article 22 of the EU Merger Regulation. The Commission opened an in-depth investigation on 7 August 2023 and now has until 5 February 2024 to take a final decision.

The Commission has the duty to assess mergers and acquisitions involving companies with a turnover above certain thresholds (see Article 1 of the Merger Regulation) and to prevent concentrations that would significantly impede effective competition in the EEA or any substantial part of it.

The vast majority of notified mergers do not pose competition problems and are cleared after a routine review. From the moment a transaction is notified, the Commission generally has 25 working days to decide whether to grant approval (Phase I) or to start an in-depth investigation (Phase II).

In addition to this proposed transaction, there are currently three on-going Phase II merger investigations: (i) the proposed acquisition of iRobot by Amazon; (ii) the proposed creation of a joint venture between Orange and MasMovil; and (iii) the proposed acquisition of Asiana by Korean Air.