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After a year and a half, the UK's competition regulators have ruled that the acquisition of Giphy by Facebook should not be continued. The Competition and Markets Authority said in a press release that it had come to the decision after its investigation found an acquisition could harm competition between social media platforms, and that its concerns can only be addressed by Facebook selling Giphy in its entirety to an approved buyer.
The acquisition could be used to deny other platforms access to Giphy and drive more traffic to other platforms. Concerns were raised that it could be used to require other platforms to give more data to access the GIFs. Giphy's advertising services could have competed with Meta's, but they were shuttered as a result of the merger.
We are protecting millions of social media users by requiring Facebook to sell Giphy.
The chair of the independent inquiry group said in a statement that the tie-up between Facebook and Giphy has removed a potential challenger in the display advertising market. It will allow Facebook to increase its market power in social media even further, through controlling competitors' access to Giphy.
McInosh said that by requiring Facebook to sell Giphy, we are protecting millions of social media users and promoting competition and innovation in digital advertising.
This would be the first time the CMA tried to get rid of a completed acquisition by a tech giant. The UK regulators decision sets a precedent for future big tech purchases.
The deal should be unwound, according to the preliminary findings report from August.
We ordered Facebook to sell Giphy after we found that the takeover could reduce competition between social media platforms and increase Facebook's already significant market power.
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The Competition & Markets Authority is based in the UK.
Robin Koch, Meta's EU director of policy communications, said that the company is considering all its options, including an appeal. Koch said in a statement that both consumers and Giphy are better off with the support of their infrastructure, talent, and resources. Giphy would be enhanced with Meta and would provide more choices for everyone who uses Giphy every day.
Meta has previously disputed the competition concerns of the CMA, and has suggested that Giphy's advertising business was never going to be a viable competitor. Meta said that it provided 50 percent of Giphy's traffic when it announced the acquisition, and that Giphy had no meaningful audience of its own. Developers and partners will have the same access to Giphy's APIs.
Meta argued that the regulator was sending a chilling message to start-up entrepreneurs, that they should not build new companies because they will not be able to sell them.
The company was fined 70 million dollars for failing to comply with the terms of its initial enforcement order. Meta was refusing to report all the required information about its compliance with the order.
Giphy had raised $150 million in funding since its founding, but it had yet to turn a profit before it was acquired, and was running out of money. It was believed that the sale price to Meta was $400 million, which was less than a previous valuation given to it by investors. Giphy's 100 plus employees haven't been able to become full Meta employees because Meta has been paying the company's bills.
Meta was able to buy upstarts likeInstagram, WhatsApp, and Oculus with relatively little challenge, and now that is under scrutiny by the CMA. The EU has opened an investigation into Meta's acquisition of Kustomer. The acquisition of Arm by Arm has attracted a lot of antitrust scrutiny from regulators around the world.
Update November 30th at 5:35AM: Meta's statement has been updated.
