Regulators Didn't Kill the Figma Deal. Adobe Did, a Year Before They Showed Up.

In September 2022, two things happened inside Adobe in the same month. It announced it would buy Figma for about $20 billion¹, the biggest deal in its history. And, quietly, it pulled the plug on Project Spice - an internal, web-based screen design tool it had been building to fight Figma head-on - discontinuing the project that same September.⁶ One of those decisions was a press release. The other was a confession. A year and three months later, Adobe walked away from the whole thing and wired Figma $1 billion just to be free of it.²

The official story is that regulators blocked the deal - and Adobe was happy to let people believe it. The DOJ sued and the EU overreached and a great American company got mugged in Brussels. What actually happened is stranger and more self-inflicted: no court ever ruled, the DOJ never filed, and the decisive evidence against Adobe wasn't found by investigators. Adobe wrote it itself, before anyone was looking.

Here is the thesis a smart friend could repeat at dinner: Adobe didn't lose the Figma deal to regulators. It lost it to its own internal documents - by treating Figma as a mortal threat in writing, then killing the products it would have used to compete, it handed the antitrust agencies the one thing that makes a deal unfixable. Not 'this hurts competition,' but 'the acquirer admits it does.'

The mistake wasn't buying Figma. It was acting like you'd already won.

Most mergers that hit antitrust trouble can be saved. A regulator finds an overlap, the company sells the overlapping business or signs behavioral commitments, and the deal closes smaller. Remedies exist precisely because regulators usually prefer a fixed deal to a blocked one. What Adobe did was foreclose every one of those exits in advance. By significantly reducing investment in Adobe XD - its existing Figma competitor - and discontinuing Project Spice, the next-generation tool built for exactly that fight, Adobe demonstrated that it had no intention of competing with Figma whether the deal closed or not.⁶ That converts an ordinary 'horizontal overlap' problem into an 'innovation harm' problem, and innovation harm has no clean remedy. You cannot divest a product you've already killed. You cannot promise to keep competing with a project you've already buried.

The UK's Competition and Markets Authority caught the scent immediately. It opened an in-depth Phase 2 investigation in July 2023, and by late November its provisional findings offered Adobe only two ways out: prohibit the deal outright, or sell Figma Design - the very asset Adobe was paying $20 billion to acquire.³ That is not a remedy menu. That is a closed door with two handles, both of which open onto the street. The CMA had found that Figma held over 80% of the product design software market by revenue, against Adobe XD's 5-to-10% share³ - and Adobe's own conduct had told the regulator that the 5-to-10% wasn't going to grow.

Who actually pulled the trigger - and who only threatened to

The American memory of this deal is mostly wrong on the mechanics. The DOJ did issue a Second Request, and in February 2023 a report that it was preparing to sue knocked roughly 5% off Adobe's shares in extended trading.⁸ But the DOJ never filed. No U.S. court ever heard the case. The forces that ended the deal were the CMA's provisional findings and the European Commission's parallel Statement of Objections, built on substantially the same theory of harm.⁵ When Adobe and Figma mutually terminated, they said it plainly: there was 'no clear path to receive necessary regulatory approvals from the European Commission and the UK Competition and Markets Authority.'⁴ The DOJ isn't in that sentence.

And the European leg is more contested than the obituary suggests. The deal didn't even meet the EU's merger turnover thresholds - the Commission only got jurisdiction because Austria and Germany asked it to take the case under an Article 22 referral.⁵ Adobe could fairly argue it was reviewed by regulators who, on a literal reading of the rules, had no automatic right to review it at all. None of which mattered, because by then the evidence had already been generated in Adobe's own files.

The $1 billion was the cheap part

On December 17, 2023, Adobe's 8-K confirmed it would pay Figma exactly one billion dollars in cash within three business days, named as the 'sole and exclusive remedy' - a clean, total break.² A billion-dollar breakup fee sounds like the punishment. It was the bargain. The deal was never really priced at $20 billion the way the headlines said. The consideration was $10 billion in cash plus $10 billion in Adobe stock fixed in share count - not in value - plus about $2.2 billion in retention shares, roughly $22.2 billion at signing.⁷ Then Adobe's stock climbed about 60%. Because the stock half was locked to a share count, that appreciation flowed straight into the price tag: the real cost of closing would have been closer to $29.6 billion.⁷

So look at the choice the way Adobe's board had to. Pay $1 billion and keep the cash, or fight two regulators with no remedy on offer, win nothing better than the right to overpay by nearly $10 billion more than the headline for a deal the CMA had already said it would prohibit. The market had signaled its discomfort from day one: Adobe's shares fell about 17% the day the deal was announced, its worst single session since 2010.⁸ The breakup fee wasn't Adobe losing. It was Adobe taking the only exit it had left - one it had nailed most of shut itself.

Wasn't this just regulators getting aggressive?

The fair objection is that this was the era of muscular antitrust, that the CMA and EC were stretching potential-competition theory to its limits, and that the Article 22 jurisdiction grab proves it. There's truth in that - the Commission really did reach for a case it had no automatic right to hear⁵, and a more permissive regulator in a quieter year might have waved the deal through with light commitments. Adobe and Figma said as much, that regulators 'don't see things the same way' and that they 'strongly disagree' with the findings.⁴ But notice what the aggressive-regulator story has to skip over: the CMA didn't have to manufacture the innovation-harm theory. Adobe supplied the facts. A regulator can stretch a theory; it cannot invent a cancelled product or a mothballed competitor. The reason the agencies could offer only prohibition-or-divestiture is that there was nothing left to remedy - Adobe had already removed the competitive pressure with its own hands, in September 2022, before a single subpoena landed.

The counterfactual is the whole point. Imagine an Adobe that kept funding Project Spice and pouring investment into Adobe XD straight through the review - visibly, expensively competing with the company it was trying to buy. Now the innovation-harm theory is much harder to prove, because the acquirer is demonstrating in real time that competition survives whatever the outcome. Behavioral remedies become plausible. The CMA's two-handled door grows a third option. That Adobe didn't do this isn't an oversight - it's a tell. The company priced Figma at $20 billion precisely because it had decided not to compete, and the decision not to compete is exactly what made the purchase impossible. Adobe out-strategized itself: it killed its own best defense to fund an acquisition that the killing made unwinnable. The genius of the move was its undoing. It paid a billion dollars to learn that the cheapest way to lose a competitor is to acquire it - and the surest way to be blocked from acquiring it is to act, in advance, like you already had.