Facebook parent company Meta has been ordered by the UK competition watchdog , the Competition and Markets Authority (CMA), to sell the gif creation website Giphy.
The CMA, which provisionally ruled in August that a sell-off was the only way to resolve competition concerns, said the move would “protect millions of social media users” and stop Facebook “increasing its significant power in social media”.
Giphy is the largest supplier of animated gifs to social networks such as Snapchat, TikTok and Twitter and the regulator said Meta could cut off the supply of gifs to rivals, or demand more user data from them in order to keep using Giphy.
As part of its in-depth investigation, the CMA also looked at how the deal would affect the display advertising market. It found that, before the merger, Giphy had launched innovative advertising services which it was considering expanding to countries outside the US, including the UK. Giphy’s services allowed companies – such as Dunkin’ Donuts and Pepsi – to promote their brands through visual images and GIFs.
The CMA found that Giphy’s advertising services had the potential to compete with Facebook’s own display advertising services. They would have also encouraged greater innovation from others in the market, including social media sites and advertisers. Facebook terminated Giphy’s advertising services at the time of the merger, removing an important source of potential competition.
The CMA considered this particularly concerning given that Facebook controls nearly half of the £7 billion display advertising market in the UK.
After consulting with interested businesses and organisations – and assessing alternative solutions (known as ‘remedies’) put forward by Facebook – the CMA has concluded that its competition concerns can only be addressed by Facebook selling Giphy in its entirety to an approved buyer.
Stuart McIntosh, Chair of the independent inquiry group carrying out the phase 2 investigation, 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.
The CMA in October fined the company a record $70 million for breaching an order imposed during its investigation into the acquisition, having said in August that it may need Facebook to sell Giphy.
Facebook bought Giphy for a reported $400 million in May 2020 to integrate the operation with its Instagram photo-sharing app. It has defended the deal to the CMA.
Meta, which is considering appealing against the decision, said that the deal would be good for Giphy, consumers and businesses.
“We disagree with this decision,” said a spokesperson for Meta.
“We are reviewing the decision and considering all options, including appeal. Both consumers and Giphy are better off with the support of our infrastructure, talent, and resources.
Together, Meta and Giphy would enhance Giphy’s product for the millions of people, businesses, developers and partners in the UK and around the world who use Giphy every day, providing more choices for everyone.”
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