“This is the greatest advertising opportunity since the invention of cereal. We have six identical companies making six identical products. We can say anything we want.” Don Draper, Mad Men, S1E1
In business, competition is everything. Whether it’s cereal, cigarettes, or clothes, you have hundreds of companies and hundreds of brands all selling the same product. To compete for your dollar, they can play with advertisements, they can experiment with the product, or they can make the product so good that switching is out of the question. Tech companies have changed that though because the big ones don’t just sell products, they sell an ecosystem. You have an iPhone with an iCloud account that connects to your MacBook and your Apple Watch that tracks your vitals also contains Apple Pay. You might like the new Google phone, but switching would just be too much work. So you’re stuck in the ecosystem out of convenience and continue to use their products and services, even if the quality is slightly mid. Similarly, you pay your utility bill each month and it’s not like you have a choice. You can’t just switch over to a new power grid, and if you own a home and want solar power, well that’s a huge switching cost. Arguably, some of tech kinda acts like a utility, no?
It’s Over
On Monday, Adobe and Figma ended their situationship as both companies mutually terminated their merger agreement. Announced in September 2022, Adobe was slated to acquire Figma for $20 billion. Figma was supposed to complete Adobe, offering the legacy design giant the online capabilities that Creative Cloud just couldn’t figure out. However, the acquisition was in question as soon as it was announced because Adobe was, and still is, a clear monopoly within design software. I can’t think of any professional designer I know who doesn’t use either Adobe or Figma. I personally use Canva, but this small competitor is targeted more at the broader market of non-designers looking to make some quick designs, not professionals designing the apps and websites we use every day. While the expectation for a combination tool that seamlessly integrated Figma’s online-first platform with Adobe’s professional software was the dream we hoped for, regulators thought otherwise:
In an interview on the Decoder podcast with The Verge editor-in-chief Nilay Patel, Adobe general counsel Dana Rao said that the company couldn’t prove to European regulators that the acquisition wouldn’t harm competition in the future — that is, that Adobe or Figma wouldn’t eventually do more to compete with one another. - Adobe explains why it abandoned the Figma deal, The Verge
Both EU and UK regulators flagged the deal. I specifically want to point out what the Competition and Markets Authority (CMA) said back in November:
… CMA’s investigation finding that around 80% of the professional product design market use Figma’s software… Digital design is an important and growing industry in the UK and relies heavily on image editing and illustration software provided by Adobe’s Photoshop and Illustrator tools. The CMA’s investigation provisionally found that, without the merger, Figma would continue to take steps to develop or expand products that threatened Adobe’s position in image editing and illustration. - Adobe / Figma deal could harm UK digital design sector, CMA
They concluded that the elimination of competition between the two from the acquisition would effectively reduce innovation and development of new competitive products, ultimately hurting the consumer in the long run. This is the basis for exactly why monopolies are bad and the reason we have antitrust laws to begin with. However, the breakup is coming from the EU and the UK — where is America?
Procrastinating
First, some quick history. Antitrust laws in the United States have a rich history, reflecting the country's pioneering efforts in curbing the power of monopolies and promoting fair competition. The post-Civil War era in the U.S. saw rapid industrialization, leading to the rise of powerful business entities and monopolies in key sectors like oil, steel, and railroads. This is where you find famous names like Rockefeller (Standard Oil) and Carnegie (U.S. Steel). But the massive amounts of wealth they acquired came at the expense of competition and consumers. Since they were the only players providing key utilities, they had all the power. This pissed off Congress and led to the Sherman Antitrust Act (1890), which made it illegal to form trusts that interfered with free trade between states or with other countries, and the Clayton Antitrust Act (1914), which expanded on the prior law to include mergers and interlocking directorates (same person making business decisions for competing companies).
Today, these laws seem to have become much harder to apply to monopolistic companies like big tech. The last major trial was Microsoft in the 2000s which was accused of maintaining a monopoly by integrating its Internet Explorer web browser into its Windows operating system to suppress competition. However, clear suppressions of competition like Amazon Basics pricing competitors out or Facebook’s acquisition of Instagram, passed right through these laws. In fact, the Federal Trade Commission's (FTC) initial attempt to unwind Meta's (formerly Facebook) acquisition of Instagram was dismissed by a federal judge, who cited insufficient evidence in the FTC's complaint to prove that the acquisition harmed competition.
As for their response to the Adobe acquisition, they kinda had nothing to say as there wasn't a direct comment from the FTC specifically on this matter. Instead, it was the Department of Justice (DOJ) that was preparing an in-depth investigation, with concerns raised about the potential impact on competition in the digital design tools market. Frankly, the FTC can’t catch a break. And although the DOJ was working on the case, the UK and EU efforts were more timely and more effective.
We did see something similar this year as Microsoft fought for years to acquire Activision Blizzard after their deal was also highly scrutinized. With a price tag of $68.7 billion, they ended up winning that deal. But for Adobe and Figma, they felt the fight was just not worth it. So nothing will change, Adobe will pay Figma $1 billion for their trouble, the U.S. is chilling on the sidelines, and the consumer is eventually better off (hopefully).
Thank you
In the past, it was obvious to fight these monopolies because you could see how the consumer was hurt. If you had full ownership of the railroads, then you could charge whatever you want. If it was a low-quality product or build, you can notice that right away; you could even crash and get hurt. The case was pretty straightforward and the evidence was malleable. But with tech, it’s a bit tricky. Even if you could argue that Amazon Basics thwart competition, is the consumer really worse off? I just bought Amazon Basic flushable toilet wipes for $4 — that’s a great deal. This is where I think government intervention actually makes sense. If we’re going to think about what’s best for the consumer, then you would want competition for all sorts of goods and services. May the best man win. But if the good or service becomes a necessity, like the internet, or even healthcare, then you would want a basic tier and maybe even a controlled monopoly (I’m looking at you FPL or ConED) to level the playing field a bit. When it comes to this deal, there’s definitely not enough design software out there and Adobe is so big, people don’t even bother to compete. But if the exit here leads to more competition and in turn more innovation, then doesn’t everybody win? As always, if you have any questions, want more explanations, or strongly disagree, comment below, follow me on Twitter (X), follow me on Threads, follow me on TikTok, or shoot me an email.
Disclaimer: These views are my own, and do not necessarily reflect the views of any organization with which I am affiliated with.