The UK competition watchdog has ordered Facebook to reverse its acquisition of Giphy, which was seen as a way to maintain market dominance through sheer buying power.
The Competition and Markets Authority said that its phase 2 investigation solidified its earlier competition concerns about the impact of Meta owning and operating Giphy.
The tie-up between Facebook and Giphy has already removed a potential challenger in the display advertising market, according to the chair of the independent inquiry group. It will allow Facebook to increase its market power in social media even further, through controlling competitors' access to Giphy.
He said that by requiring Facebook to sell Giphy, we are protecting millions of social media users and promoting competition and innovation in digital advertising.
The investigation of the acquisition that Facebook announced in May 2020 has led to the intervention of the watchdog.
Further integration of Giphy by Facebook was halted in June 2020 while the oversight continued.
The regulator fined Facebook almost $70 million for deliberately withholding information related to ongoing oversight of the acquisition.
The lack of choice in the supply of animated GIFs was one of the reasons why the Facebook-Giphy acquisition raised a number of competition concerns.
The data-mining giant might change the terms of access for rivals like TikTok, and could even require them to provide it for it to work.
The risk of competitive harm through data extraction from other services, as well as from other more obvious risks, such as Facebook shutting off rivals' access to the platform, were all held to be of concern by the CMA.
After consulting with businesses and assessing alternative solutions put forward by Facebook, the CMA concluded that its competition concerns can only be addressed by Facebook selling Giphy in its entirety to an approved buyer.
One of the theories of harm is that data can be taken from other services. The input price is the spirit of raising rivals' costs. It is time to move on from garden variety theories.
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Caffar3Cristina is a member of the Caffarra family.
Giphy had pre-merger been offering paid advertising services in the US and was considering expanding to other countries, which it said had the potential to compete with Facebook. The competition was terminated by Facebook.
Giphy had the potential to compete with Facebook's own display advertising services according to the regulators. They would have encouraged more innovation from others in the market. Giphy's advertising services were terminated by Facebook at the time of the merger. Facebook controls nearly half of the display advertising market in the UK.
The final report summary can be found here.
The merger assessment hinges on whether there will be a substantial lessening of competition if the takeover goes ahead. In the case of Facebook-Giphy, it has concluded that there is very limited choice of alternatives to Giphy for other social media platforms, and that Facebook has significant market power in display advertising in the UK.
Giphy has the potential to develop its paid advertising model, including a potential UK launch, and the feedback from advertisers has been positive about the GIF-based ad format.
It concluded that the merger would result in an input foreclosure in social media, as a result of vertical effects, and that Facebook would have an incentive to foreclose rivals access to Giphy.
The competition concerns were assessed by the CMA, and they considered and rejected three options suggested by Facebook.
Facebook suggested that Giphy be kept open access, and that a remedy be put in place to remove a restriction on commingling its search results with other providers.
The proposals themselves are not enough to address all of the concerns of the CMA, and in rejecting them as unsuitable it highlights the challenge of ongoing compliance monitoring. The Merger does not have the characteristics of a behavioural remedy.
In a separate oversight procedure related to the proposal to deprecate support for tracking cookies, the CMA said it is minded to accept a number of behavioral commitments made by the company. That is not a merger review, it is a competition complaint.
The summary of the final report on Facebook-Giphy states that the dynamic nature of the SLCs that they have found make them less likely to provide an effective and comprehensive solution. There are a number of risks with Facebook's proposed remedy options, including their inability to comprehensively address the SLCs, the challenges in specifying Facebook's obligations, the risks of Facebook being able to circumvent these obligations, and the difficulties in monitoring and enforcing Facebook's compliance with We found that Facebook's remedy proposals wouldn't work in addressing the SLCs we have found.
The merger of Giphy and Facebook was already completed, so there is some issue with the conclusion that only a full divesture of Giphy will be effective.
To address these particular challenges, Facebook must restore some of the dissolved business functions and assets to Giphy, which will allow it to compete effectively throughout and following the divestiture.
We think that Facebook will need to provide incentives to encourage former Giphy employees to transfer back to Giphy, and to recruit replacements for staff who don't want to do so. Giphy will need to be sold with sufficient financial resources to allow it to operate and compete as it would have done had it not been acquired by Facebook.
Meta/ Facebook was contacted for their response to the order to overturn the Giphy acquisition.
The company questioned the jurisdiction of the UK regulators over its business after they found it to be in violation of the rules.
In a brief statement now, a Meta spokesman said:
We disagree with the decision and are considering all options, including an appeal. Giphy would be enhanced by Meta and would be used by millions of people, businesses, developers and partners in the UK and around the world.
Is it possible to kill killer acquisitions?
Tech giants can use their financial muscle to protect market power by buying budding competition to deflate the risk posed by startup and new services, which has been a major topic of concern.
Competition regulators have failed to evolve theories of harm to keep up with digital market dynamics. Failing to consider how data can be used against competitors. Market power can be used in one channel to quickly scale into a new segment. There are harms to consumers from free services at the point of use.
In recent years, legislators and regulators have started to respond to such concerns by updating rules, such as in Germany which passed an update to its regime to cover digital platforms at the start of this year. The country has a number of open procedures against tech giants to confirm its ability to impose pre-emptive measures.
The Biden administration's elevation of Lina Khan to chair the FTC, earlier this year, marks a key moment of change on US soil, signalling lawmakers' support for a reformist approach toward regulating tech.
The paper looked at how the government's outdated ways of identifying monopolies have failed to keep up with modern business realities. The establishment regulatory agenda is now set by what was initially dismissed as hipster antitrust. The tech lobby working through channels like the US Chamber of Commerce is still opposed to Khan.
The lag between tech and antitrust has been addressed by the Europe Commission.
The Digital Markets Act requires that platform giants classified asgatekeepers be subject to a set of ex ante rules. The Commission has the power to impose structural or behavioural remedies where there has been systematic non-compliance.
It's not clear whether the DMA will help the competition.
Perspectives on Big Tech's market power.
The UK has an update to domestic competition law that is aimed at tackling platform power, with a new regime of pro-competition rules for platforms deemed to have strategic market status.
It's too late to get rid of baked in tech consolidation. Regulators have been sharpening their understanding of digital markets for some years now, so it's not too late to reverse Facebook-Giphy.
Over the past decades, outdated approaches to regulation of digital markets have allowed thousands of tech acquisitions to be waived through, including Facebook's purchase of photo-sharing siteInstagram, messaging platform WhatsApp and virtual reality headset maker Oculus.
At the end of last year, the Commission failed to block the acquisition of the health tracker by the adtech giant, despite a huge outcry from civil society warning over the rights risks. The EU's competition commission accepted a number of behavioral remedies proposed by Google, which included a promise not to shut out third party developers from the Fitbit's platform, and a pledge not to use health data for ad targeting for a full ten years.
The acquisition of Kustomer by Facebook was cleared by the CMA using a fairly narrow assessment of potential competition risks and ignoring privacy advocates who were raising concerns over what the adtech giant would do with Kustomer users' data.
The decision by the CMA to order Facebook to reverse its acquisition of Giphy is a significant development, but it is just one decision that hasn't gone big tech's way.
The move by the CMA was described by a former chief competition economist within the Commission as a "highly symbolic decision". He warned against reading too much into one no.
I have been repeating the 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 He told us that having a 1 does not change the overall picture.
The Commission made it possible for Member States to refer cases for merger review when they may fall between the cracks of national antitrust policy, with the risk of an innovative tech or business being acquired by a more established rival in order to kill budding competition.
The EU was lagging on this, and he said that the EU's finally signalling an intention to discuss big tech acquisitions with US lawmakers is a good sign.
Major reworking of how antitrust gets applied in the US will be essential to rein in what remains of US tech giants, however innovative the actions of individual regulators elsewhere.
Data are part of the business model, so they must be part of the competitive assessment too, as I think the new theories of harm are just that, good economists that are aware of what economics has been saying and finding in the past 10 years. Privacy issues are not just dealt with by someone else.
Good economics, openness of mind, and a higher risk appetite by their leadership, means the CMA is trying to move the bar in a typically extremely conservative field with shy regulators. Let's be hopeful!
The UK is working on a reform of competition law that will be used to regulate platform giants who are called strategic market status. Legislation to empower the dedicated Digital Markets Unit that was set up to focus on this area is still pending.
There have been a number of open investigations into various aspects of big tech's business and ongoing scrutiny of acquisitions.
The UK is not a member of the EU so the regulatory regime has a free hand to go its own way on tech policy. UK regulators have said they consult with international counterparts on issues of common concern.
The EU is trying to harmonize digital regulations under legislative updates and extensions such as the Digital Services Act, but there is concern that the push to reducefragmentation may benefit tech giants.
The UK could apply a more tailored regime to address the shortfalls in the bloc's one-size-fits-all plan for platform giants. It looks vital that the creative thinker at the CMA.
The UK plan to tackle Big Tech won't be one-size fits all.
Europe is pushing to rewrite the digital rulebook.
