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DOJ Prepares to Block Adobe's $20 Billion Acquisition of Figma

The U.S. Department of Justice (DOJ) is said to be preparing an antitrust lawsuit seeking to block Adobe Inc.’s acquisition of Figma Inc. for $20 billion. The deal is predicted to be one of the largest takeovers of a software startup after Meta Platforms Inc. procured Instagram, a small but rising competitor to Facebook, in 2012.

Figma Inc. is a startup that has rapidly seized a significant market share for designing app and website interfaces. Its popularity can be attributed to its extensive prototyping features, which reduce the amount of manual work involved in creating interface designs. Before Figma was launched, designers usually had to go through multiple iterations of visual assets until finalizing the interface design, but the rising startup introduced tools that facilitate the process more efficiently. In particular, Figma allows designers to animate buttons and perform other tasks, such as resizing ads, without manual coding.

Thanks to these novelties, Figma was on a fast growth trajectory until Adobe – a corporate giant with market capitalization of over $175 billion - announced the proposed acquisition in the years of 2020 and 2021. Although the offers were initially declined, in 2022, Figma decided to accept an offer from Adobe that was double its valuation. This move has been regarded by Wall Street analysts as a sign of intense competitive pressure on Adobe.

The proposed acquisition has raised concerns about its impact on competition in the creative software market, as it would further strengthen Adobe's already dominant position. The Department of Justice has been among the most vocal critics of the deal and is reportedly considering taking a more aggressive approach by filing an antitrust lawsuit. The Biden Administration shares the concern that the acquisition could reduce options for design software used by creative professionals. This is particularly concerning given the increasing importance of digital design in many industries, including technology, advertising, and e-commerce. As a result, the DOJ is closely scrutinizing the deal and weighing its potential impact on competition and innovation in the market.

Despite the criticism and the anticipated lawsuit hurdles, Adobe expects to complete the acquisition of Figma this year and is currently engaging in "constructive and cooperative discussions" with various stakeholders. The spokesperson of Adobe has been relentlessly advocating the deal, claiming that Adobe and Figma have divergent areas of focus. “Figma is a leader in interactive product design, focused on building a collaborative web platform. Adobe is a leader in the creative tools space, helping millions of users create amazing visual content. Together, our vision will help enable millions of consumers to transform their productivity with creativity. We are engaged in constructive and cooperative discussions with regulators in the US, UK and EU, among others,” said the spokesperson. Additionally, Adobe has promised to keep the free-use tier in the program in order not to disrupt Figma's existing development strategy.

While Adobe claims that the deal is harmless, acquiring Figma - a tool that companies use for designing apps and websites and collaborating on ideas - is an audacious step to take a growing competitor off the market, which could result in higher prices. As the lawsuit is yet to be filed, only time will tell how this saga will play out, and whether Figma's acquisition will ultimately benefit or harm the design industry.