Meta has been ordered to sell the social media GIF library Giphy, following a long investigation of the tech giant’s purchase.
The Competition and Markets Authority (CMA) has ruled that the deal would lead to a 'substantial lessening of competition' in social media services in the UK and internationally, as well as drop in display advertising in the UK due to a loss of competitive innovation.
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The CMA has now concluded that Giphy must be sold off to an approved buyer.
According to an independent panel studying the evidence, the deal gave Meta excessive power over the market, as it was able to deny access to Giphy GIFs to rival social media platforms. Concerns were also raised over the potential for Meta to require firms that use Giphy, such as Twitter or TikTok, to sign new terms of access that could give Meta more UK user data.
Another market that the CMA ruled Meta’s acquisition would negatively impact is the display advertising market. It stated that prior to the deal, Giphy was engaged in a number of advertising services throughout the US based around GIFs, and there was potential for expansion into countries such as the UK. Meta ended these services upon completion of the acquisition.
Meta’s share of the £7 billion advertising market in the UK, equivalent to almost half, was cited as context, and as a point of concern. It also ruled that had Giphy continued to operate these services, it may have done so in competition with Meta and other companies, leading to positive change driven by competition, which the market now lacks.
Last year, the CMA raised concerns over the 2020 acquisition of Giphy by Meta, then Facebook, for $400 million. After the first round of an investigation, the watchdog released a report in August 2021 stating that the move had negatively impacted competition between social media platforms.
Following a phase 2 decision by the CMA in November 2021, which ordered Meta to sell Giphy due to the harm that it could cause users and advertisers, Meta appealed the decision. However, in July the Competition Appeal Tribunal (CAT) upheld the CMA’s ruling, and today’s decision is described as ‘final’.
“This deal would significantly reduce competition in 2 markets,” stated Stuart McIntosh, chair of the independent inquiry group tasked with the investigation.
“It has already resulted in the removal of a potential challenger in the UK display ad market, while also giving Meta the ability to further increase its substantial market power in social media. The only way this can be addressed is by the sale of Giphy. This will promote innovation in digital advertising, and also ensure UK social media users continue to benefit from access to Giphy.”
IT Pro has approached Meta for a statement.
