The UK’s Competition and Markets Authority (CMA), on Tuesday, ordered Meta, the parent company of Facebook, to sell the GIF platform Giphy after a tribunal upheld its view that the acquisition could limit choice for UK social media users and reduce innovation in UK display advertising.
“We are disappointed by the CMA’s decision but accept today’s ruling as the final word on the matter,” a Meta spokesperson says in a statement. “We will work closely with the CMA on divesting Giphy.”
This is the first time the regulator has blocked an acquisition struck by the Silicon Valley tech giant.
Stuart McIntosh, Chair of the independent inquiry group carrying out the remittal investigation, says, “This deal would significantly reduce competition in 2 markets. It has already resulted in the removal of a potential challenger in the UK display ad market while also giving Meta the ability further to increase its substantial market power in social media.”
The case
Meta acquired Giphy for nearly €370M in May 2020. Giphy is one of the largest social GIF (Graphics Interchange Format) making platforms on the internet, providing tools for creating, remixing, and sharing GIFs.
In November 2021, CMA investigated the acquisition and ordered Meta, then called Facebook, to sell Giphy since the deal could harm social media users and UK advertisers.
However, the tech giant appealed against the decision and maintained that Giphy would be “openly available” to other social networks.
In July 2022, the Competition Appeal Tribunal (CAT) ruled in favour of the CMA on five of six challenged grounds. Only a procedural ground relating to sharing third-party confidential information was found in Meta’s favour.
The CMA has conducted an expedited review, including the new submissions from Meta and Giphy, and concluded the only way to avoid the significant impact the deal would have on competition is for Giphy to be sold off in its entirety to an approved buyer.
The CMA said the merger would negatively impact the display advertising market. However, the CMA also added that the Giphy takeover would remove a potential competitor from the £7B UK display advertising market in the UK.
“The only way this can be addressed is by selling Giphy. This will promote innovation in digital advertising and ensure UK social media users continue to benefit from access to Giphy,” adds McIntosh.
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