UK orders Facebook to sell Giphy, rejects merger terms offered by Meta

The UK Competition and Markets Authority (CMA) today ordered the owner of Facebook Meta to sell Giphy, saying the merger “would reduce competition between social media platforms and the deal has already removed Giphy as a potential challenger in the display advertising market.”

Facebook bought Giphy in May 2020 for $ 400 million “but has been required to separate the companies” since June 2020, when the CMA imposed an initial enforcement order (IEO), the UK government body said. in a press release. summary of its final report today. After 17 months of investigation, “we have decided that the only effective way to resolve the competition concerns that we have identified is for Facebook to sell Giphy, in its entirety, to a suitable buyer,” the CMA wrote.

The CMA said it discovered that “Facebook would be able to increase its already significant market power over other social media platforms by denying or limiting other platforms’ access to Giphy GIFs, thereby generating more of traffic to Facebook-owned sites – Facebook, WhatsApp and Instagram, which already accounts for 73% of the time users spend on social media in the UK “and” changing the conditions of access, for example by requiring that TikTok, Twitter, and Snapchat provide more user data for accessing Giphy GIFs. “

Facebook had proposed merger terms in order to save the purchase, but the CMA said “behavioral remedies” would not solve competition concerns and Facebook could “sidestep” such requirements. Meta can appeal the decision of the CMA.

CMA dismisses claim that Giphy cannot compete on its own

The CMA also said that “Facebook terminated Giphy’s advertising services at the time of the merger, removing a significant source of potential competition,” which is “of particular concern given that Facebook controls nearly half of the $ 7 billion UK display advertising market pounds sterling. “

The CMA said:

The parties told us that it was likely that Giphy would have become a significantly weakened company if it had not been bought by Facebook. Our view is that, had the merger not taken place, Giphy would have continued to provide GIFs to social media platforms (including Facebook), as it did before the merger, and would have continued to innovate. , develop its products and services, generate income and explore (with financial and business support from investors) various options to further monetize its products. This would have been the case regardless of Giphy’s ownership (i.e. it operated independently, as it did before the merger, or in the hands of another buyer).

If Facebook had not bought Giphy, it would have had the option of “(i) paying some form of platform royalty or license to Giphy, (ii) relying more on other GIF providers (for example). example, Tenor), or (iii) build your own GIF library, ”the CMA said.

Meta considers the call

Meta said in a statement provided to Ars that he disagreed with the decision and was considering appealing. “Consumers and Giphy are doing better with the support of our infrastructure, talent and resources,” said the owner of Facebook. “Together, Meta and Giphy would make Giphy’s product better for the millions of people, businesses, developers and API partners in the UK and around the world who use Giphy every day, providing more choice for everyone. “

An appeal would apparently be heard by the UK Competition Appeals Tribunal. The Wall Street Journal Noted that the appeals tribunal recently upheld a CMA ruling that “blocked Saber Corp.’s association with rival travel reservation service Farelogix Inc.”