UK Regulator Orders Meta (Formerly Facebook) To Sell Giphy, Calls 2020 Deal Anticompetitive

UK regulators today ordered Meta, formerly Facebook, to unwind its acquisition of popular GIF-making and sharing app Giphy after concluding the deal was anticompetitive – a significant call amid rising pressure on both sides of the Atlantic to rein in the power of the social media giant, including by breaking it up.

“We have decided that the only effective way to address the competition issues that we have identified is for Facebook to sell Giphy, in its entirety, to a suitable buyer,” the Competition & Markets Authority said in a release.

This would be the first time the CMA has attempted to unwind a completed acquisition by a tech giant. The decision wasn’t total surprise, following provisional findings issued in August. The CMA recently fined Facebook £50.5 million (just under  $70 million) for breaching an initial enforcement order related to the deal. Facebook acquired the venture-backed startup in May of 2020 for $400 million.

U.S. lawmakers and regulators have also called for Facebook to be broken up, pointing to its acquisitions of Instagram and WhatsApp, and accusing the company of purposefully stifling competition by snapping up promising rivals. Last year, the Federal Trade Commission sued to break up Facebook in U.S. District Court for the District of Columbia but Judge James Boasberg said the agency failed to provide evidence of its monopoly power in social networking. In an amended complaint filed in August, the FTC added more detail around its allegations. Facebook early last month asked the judge to dismiss the revised suit with prejudice.

Facebook has also been dealing with fallout from reams of internal documents made public by whistleblower Frances Haughen. The documents and her testimony in the U.S., UK and other global capitals resulted a stream of bad press for the Mark Zuckerberg company all fall, punctuated by the founder-CEO renaming it Meta and outlining plans and investment in what he calls the next phase of the internet, the Metaverse, based on virtual reality.

In its statement today, the CMA said it “concluded that Facebook’s acquisition of Giphy would reduce competition between social media platforms and that the deal has already removed Giphy as a potential challenger in the display advertising market.”

Specifically, the independent CMA panel reviewing the merger concluded that Facebook would be able to increase its already significant market power in relation to other social media platforms by “denying or limiting other platforms’ access to Giphy GIFs, driving more traffic to Facebook-owned sites – Facebook, WhatsApp and Instagram – which already account for 73% of user time spent on social media in the UK, or changing the terms of access by, for example, requiring TikTok, Twitter and Snapchat to provide more user data in order to access Giphy GIFs.”

On display advertising, the panel found that before the merger Giphy had launched innovative advertising services which it was considering expanding to countries outside the US, including the UK. Giphy’s services allowed companies – such as Dunkin’ Donuts and Pepsi – to promote their brands through visual images and GIFs which had the potential to compete with Facebook’s own display advertising biz.”

“Giphy’s service would also have encouraged greater innovation from others in the market, including social media sites and advertisers, the CMA said. “Facebook terminated Giphy’s advertising services at the time of the merger, removing an important source of potential competition. The CMA considers this particularly concerning given that Facebook controls nearly half of the £7 billion display advertising market in the UK.”

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