The proposed acquisition of digital design rival Figma by Adobe for a staggering $20 billion has drawn the attention of the European Commission (EC), which has announced that the deal may "significantly affect competition in the market for interactive product design and whiteboarding software."
While the EC acknowledged that the transaction does not meet the turnover thresholds set out in the EU merger regulations, there are provisions in Article 22 of the EU merger regulations that allow member states to refer specific cases to the EC if they believe that a transaction will diminish competition in specific European markets.
Austria, Belgium, and 14 Other Countries Request EC Review
The EC has received requests from Austria, Belgium, Bulgaria, Cyprus, Czechia, Denmark, Finland, France, Germany, Iceland, Ireland, Italy, Luxembourg, the Netherlands, Norway, and Sweden to examine the deal and determine whether there is a case to answer.
In a press bulletin published by the EC, it was noted that "this provision allows Member States to request the Commission to examine a concentration that does not have an EU dimension but affects trade within the single market and threatens to significantly affect competition within the territory of the Member States making the request."
While this news may come as no surprise, given the significant size of the deal and the scrutiny it has already faced in other jurisdictions, including the U.S. Department of Justice (DoJ) and the UK’s competition authority, it is a notable development that underscores the importance of regulatory approvals in major mergers.
Why This Matters
The EC’s review of the Figma acquisition highlights the growing trend towards greater scrutiny of large tech deals in Europe. The European Commission has been increasingly active in reviewing and blocking high-profile mergers, including the attempted takeover of Ryanair by Lufthansa last year.
In addition to the potential impact on competition, the deal also raises questions about the implications for Figma’s existing users and customers. As a collaborative design platform, Figma has become an essential tool for many businesses and individuals around the world.
Adobe’s Response
Representatives from Adobe have yet to comment publicly on the EC’s review of the acquisition, but it is likely that they will work closely with regulators to address any concerns.
The company’s proposed acquisition of Figma was announced in June 2022 and has been subject to intense scrutiny ever since. While the deal has not yet been approved by regulators in all jurisdictions, Adobe remains committed to completing the transaction.
Background on the Deal
Figma is a 10-year-old venture-backed startup that has quickly become a leading player in the collaborative design platform market. The company’s software allows teams to create and collaborate on digital designs in real-time, making it an essential tool for businesses and individuals around the world.
Adobe, on the other hand, is one of the largest and most well-established companies in the tech industry. With a portfolio of creative applications that includes Photoshop, Illustrator, and InDesign, Adobe has a long history of innovation and leadership in the design and digital media markets.
Regulatory Scrutiny: A Growing Trend
The EC’s review of the Figma acquisition is part of a broader trend towards greater regulatory scrutiny of large tech deals. As governments around the world grapple with issues such as competition, data protection, and online safety, they are increasingly turning to regulatory tools to address concerns.
In recent years, we have seen a growing number of high-profile mergers blocked or delayed by regulators in Europe and beyond. This trend is likely to continue in 2023 and beyond, as governments seek to ensure that large tech deals align with their policy priorities.
The Impact on Startups
The Figma acquisition has significant implications for startups in the collaborative design platform market. While Adobe’s proposed acquisition of Figma may create opportunities for growth and innovation, it also raises questions about the potential impact on competition and user choice.
As a startup founder or investor, it is essential to stay informed about regulatory developments that may affect your business. By understanding the latest trends and policies in tech regulation, you can better navigate the complex landscape of EU merger regulations and make informed decisions about your company’s future.
Conclusion
The EC’s review of the Figma acquisition marks a significant development in the ongoing saga surrounding Adobe’s proposed takeover of the digital design rival. While this news may come as no surprise, given the intense scrutiny the deal has already faced, it underscores the importance of regulatory approvals in major mergers.
As governments around the world grapple with issues such as competition, data protection, and online safety, they are increasingly turning to regulatory tools to address concerns. By staying informed about the latest trends and policies in tech regulation, startup founders and investors can better navigate this complex landscape and make informed decisions about their company’s future.