UK competition regulator orders Meta to sell Giphy
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UK competition regulator orders Meta to sell Giphy

The UK’s Competition and Markets Authority (CMA) Tuesday issued an order requiring Meta (previously Facebook) to sell online image platform Giphy over competition concerns about the supply of display advertising and social media services in the country.

Meta acquired Giphy in May 2020 for $400 million with plans to integrate the platform’s GIF library into Instagram and other Meta-owned apps. The CMA promptly issued an enforcement order prohibiting Meta from interfering with the regulator’s investigation, including the integration of Meta and Giphy business. Last month, the CMA fined Meta £50.5 million for breaching the order.

The CMA launched an inquiry into the merger in January 2021 and published its final report on November 30. It found that the merger allowed Meta to increase its already significant market power by denying or limiting other social media platforms’ access to Giphy’s GIFs and thereby driving traffic towards its own platforms. Meta’s services, Facebook, WhatsApp and Instagram, already account for 73 percent of user time on social media in the UK.

Giphy also provided advertising services by promoting brands through images and GIFs. These services had the potential to encourage innovative advertising in the market and to compete with Meta’s own display advertising services, which already accounted for nearly half of the display advertising market in the UK. The merger with Meta terminated these advertising services and ended a significant source of potential competition in the market.

The CMA consulted several interested businesses and organisations, assessed Meta’s proposed alternatives and ultimately decided that the issues of competition can only be resolved through the sale of Giphy to an approved buyer.

The Chair of the independent inquiry group carrying out the second phase of the investigation, Stuart McIntosh, said:

The tie-up between Facebook and Giphy has already removed a potential challenger in the display advertising market. Without action, it will also allow Facebook to increase its significant market power in social media even further, through controlling competitors’ access to Giphy GIFs. By requiring Facebook to sell Giphy, we are protecting millions of social media users and promoting competition and innovation in digital advertising.

This is the first time the UK competition regulator has completely reversed such an acquisition by Big Tech, indicating growing concern to oversee the trend of eliminating smaller rivals in the tech space.