Adobe-Figma deal likely to attract antitrust scrutiny

Some users of Figma's design software reacted with dismay on Thursday when they found out the company was going to be acquired by Adobe, the unloved giant in the space. Other observers immediately concluded that the acquisition looks downright illegal under antitrust laws.

Why it matters: The Biden administration is on the record as wanting to beef up antitrust enforcement. The Figma deal, at $20 billion, is certainly large enough to grab the attention of regulators. The big question is whether they'll conclude that suing to block it is a case they can win.

• Either the Department of Justice or the Federal Trade Commission could review the merger; both have taken a renewed interest in software and digital mergers.

Between the lines: The Clayton Antitrust Act says any acquisition that would reduce competition in an industry is illegal.

• Figma was founded as an Adobe competitor and has grown impressively by doing exactly that — implying there's a case to be made that this acquisition is anti-competitive.
• Insofar as Adobe is already the dominant player in the space, any acquisition, let alone a $20 billion one, will be looked at carefully.

What they're saying: "The fact that Adobe is not typically identified as a Big Tech platform should provide [Adobe and Figma] with little if any comfort," Charles Rule, a partner at the Rule Garza Howley law firm and former DOJ antitrust official, tells Axios.

• "This deal appears to raise straightforward, traditional antitrust issues," he says.
• "There's enough here to get a close look, and maybe a complaint," adds a former FTC antitrust official.
• Another former FTC attorney tells Axios to expect a thorough initial investigation into possible overlaps.

For the record: "The combination of Adobe and Figma will greatly benefit consumers," Adobe said in a statement. "We expect the transaction to close in 2023, subject to the receipt of required regulatory clearances and approvals."

How it works: Once Figma becomes part of Adobe, it might be more free to raise its prices, since it'll no longer be driven by the need to win business away from Adobe.

• Conversely, Adobe would also have more freedom to raise prices of its own legacy software, since if users flee to Figma they'd still remain Adobe customers.

The big picture: Both FTC chair Lina Khan and DOJ antitrust chief Jonathan Kanter have been very open about wanting to go after Big Tech.

• What's not clear is whether Adobe, with its $138 billion market cap, is big enough to really count as Big Tech in their eyes — or if the regulators would be able to devote their strained resources to going after this deal.
• Moreover, blocking a software deal is exceedingly difficult: even defining the market at issue is tough thanks to the malleability of software itself.

The bottom line: Today's antitrust enforcers, with the benefit of hindsight, regret having let previous tech deals sail through — specifically Facebook's acquisition of onetime creative upstart Instagram. They don't want to make the same mistake twice.