(Bloomberg) -- The Justice Department is preparing an antitrust lawsuit seeking to block Adobe Inc.’s $20 billion acquisition of startup Figma Inc., people familiar with the matter said.
A case is expected to be filed as soon as next month, although the timing could slip, said one of the people, all of whom asked for anonymity to discuss the confidential probe. The deal needs approval from several antitrust authorities and the merger agreement allows for a possible extended regulatory review with an outside completion deadline of March 2024. Adobe had a meeting with the DOJ yesterday, according to another person.
The deal also faces an antitrust review in the European Union after the bloc’s antitrust watchdog said it had received requests from national regulators to look into the deal. The UK Competition and Markets Authority is reviewing the merger as well, and the three jurisdictions often coordinate on their investigations.
The antitrust division, which has taken a more aggressive approach to mergers under President Joe Biden, is concerned the deal — one of the largest takeovers of a private software maker — would reduce options for design software used by creative professionals.
Adobe, the dominant force for years in software such as Photoshop and Illustrator for design professionals, announced the deal to acquire Figma in September. The purchase is a massive bet that more creative work will be done by small businesses and everyday users on the web, a market that Figma has rapidly seized. While Adobe has introduced less-expensive, streamlined products for that audience, most of its offerings are still heavyweight programs aimed at specialists.
The company still expects to close the transaction in 2023, and is engaged in “constructive and cooperative discussions with regulators in the US, UK and EU among others,” according to an Adobe spokesperson. The Justice Department declined to comment.
Figma is mainly used for designing app or website interfaces, and has trounced Adobe’s competing XD product in recent years. Adobe has argued that the transaction isn’t anticompetitive because the startup isn’t a rival of important products like Photoshop, which is used for photo editing, or Premiere, which is used for cutting video.
Still, the deal immediately drew comparisons to Meta Platforms Inc.’s 2012 acquisition of Instagram, another takeover of a small, but rising competitor by the powerful incumbent it threatened to upend.
Adobe tried to buy Figma in 2020 and 2021 as the startup rapidly gained steam, according to a filing with details on how the merger came together. Eventually in 2022, Figma accepted an offer double its valuation at a time when many of its peers were seeing decreases. Wall Street analysts saw the price tag as revealing severe competitive pressures on Adobe. Figma unsuccessfully solicited a bid from Microsoft Corp., too, before accepting Adobe’s offer.
Figma users worried that the acquisition may slow the pace of innovation or increase prices. Adobe has vowed to keep a free-use tier in the program and not disrupt Figma’s existing development strategy. Figma Chief Executive Officer Dylan Field’s full stock package — worth about $1 billion — is contingent on him staying at Adobe for four years.
The lawsuit represents Adobe’s most serious spat with antitrust regulators since the 1990s, when it was forced to divest a program that competed with its Illustrator graphic design program as part of a merger with Aldus Corp. It saw another Justice Department investigation in 2005 over its acquisition of Macromedia’s suite of web development software, but the deal was ultimately allowed to close without a legal challenge.
(Updates with details on timing, other reviews starting in second paragraph.)
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