CMA says takeover of gif creation website restricts choice for social media users
Facebook’s parent company, Meta, has been directed by the UK competition watchdog to dispose of the gif creation website Giphy, the first time the regulator has stopped a deal clinched by a big Silicon Valley company.
The Competition and Markets Authority (CMA) told Meta in November that the only way to address competition concerns was to sell Giphy, the largest supplier of animated gifs to social networks such as Twitter, TikTok, and Snapchat, which it bought two years ago for $400m (£290m).
Meta appealed against the decision, which the regulator said would “protect millions of social media users” and prevent Facebook from “increasing its significant power in social media”, which was backed by the Competition Appeal Tribunal on five of the six grounds challenged.
After the tribunal’s ruling in July, the CMA carried out an “expedited review” of its original ruling, which included new submissions from Meta and Giphy, and on Tuesday it said it upholds its order to dispose of the business.
Notably, the regulator said Meta would be able to boost its “already significant market power” by stopping the supply of gifs to rivals, or demanding additional user data from them in order to continue using Giphy. Meta said it took Tuesday’s CMA decision as the final word on the matter and would sell off Giphy.
The Facebook parent company, which also owns the messaging service WhatsApp and Instagram, composes 73% of user time spent on social media in the UK, the CMA said. In that context, the CMA said a takeover would get rid of a potential competitor from the £7bn UK display advertising market, where Facebook is the largest player forming about half the market.
The watchdog said it was “particularly concerning” that Facebook discontinued Giphy’s advertising services, which the company was ready to diversify, at the time of the merger.
Stuart McIntosh, the chair of the independent inquiry group that conducted the remittal investigation, said:
Buy Crypto Now“This deal would significantly reduce competition in two markets. It has already resulted in the removal of a potential challenger in the UK display ad market, while also giving Meta the ability to further increase its substantial market power in social media.”
“The only way this can be addressed is by the sale of Giphy. This will promote innovation in digital advertising, and also ensure UK social media users continue to benefit from access to Giphy.”
Interestingly, the CMA and Meta have been at each other’s throats throughout the investigation process. This month, the watchdog penalized Meta £50.5m for “deliberately” declining to provide information after an order to separate Giphy’s business from Facebook during the investigation period.
A spokesperson for Meta said:
“We are disappointed by the CMA’s decision but accept today’s ruling as the final word on the matter. We will work closely with the CMA on divesting Giphy.”
“We are grateful to the Giphy team during this uncertain time for their business, and wish them every success. We will continue to evaluate opportunities – including through acquisition – to bring innovation and choice to more people in the UK and around the world.”
