CMA To Reconsider Order For Meta To Sell Giphy


UK competition regulator, the CMA, tells Silicon UK it has agreed to reconsider over next three months its ruling to Meta to sell off Giphy

The UK’s competition regulator has confirmed to Silicon UK that over the next three months, it will ‘reconsider’ a landmark ruling to Facebook parent Meta.

The Competition and Markets Authority (CMA) decision to re-evaluate its order to Meta to sell off GIF provider Giphy, came after judges with the Competition Appeal Tribunal sided with the UK regulator over its decision in five out of the six grounds.

However Meta won one of the six grounds, leading to the CMA saying it will review its decision within a three month period.

Image credit: Meta
Image credit: Meta

CMA review

A CMA spokesperson confirmed the decision to Silicon UK, after Bloomberg had first reported on the review.

“The recent judgment from the Competition Appeal Tribunal endorsed the CMA’s approach to reviewing mergers that may harm innovation,” the CMA spokesperson told Silicon UK.

“The CMA won on 5 of 6 grounds, with Meta winning 1 in relation to our process of sharing confidential information,” the spokesperson said. “We have agreed to reconsider our decision in light of this finding.”

“We will commence our review shortly and will seek to complete the remittal within three months of today’s order,” the CMA spokesperson told Silicon UK.

It is understood the Competition Appeal Tribunal had found that the CMA had not shared a fully unredacted version of the CMA’s provisional findings and final report with Meta’s external advisers, hence its decision.

It is thus understood that Meta will now be given the opportunity to comment on the CMA’s final report, which the CMA is adopting as the provisional remittal findings, following access by its external advisers to a fully unredacted version.

Controversial deal?

Facebook’s acquisition of Giphy took place in May 2020, and the social networking giant promised at the time to grant third parties the same level of access to Giphy’s content as before.

Both firms are headquartered in the United States.

But in June 2020 the UK’s competition authority got involved in the matter, because it said that Giphy did business in the United Kingdom.

The CMA examined whether the $400 million (£317m) deal “has resulted or may be expected to result in a substantial lessening of competition in any market or markets in the United Kingdom”.

The CMA began its initial investigation in January 2021, and after the initial investigation, the CMA said that if the two companies remain merged, Giphy could have less incentive to expand its digital advertising.

In April 2021 the CMA said it would deepen its investigation of the takeover of Giphy, which prior to its acquisition, was headquartered in New York and Los Angeles.

The deal had raised competition concerns because Giphy is widely used on social media, and while Facebook said half of Giphy’s traffic originates from Facebook apps, such as Instagram and WhatsApp, Giphy also provides images to others including Snapchat, TikTok and Twitter.

Facebook had also previously said it plans to integrate Giphy into its Instagram photo app, potentially giving it access to large amounts of data.

This raised competition concerns about Facebook’s existing market power in display advertising.

CMA order

Matters became more worrying for Mark Zuckerberg in August 2021, when the CMA “provisionally found Facebook’s merger with Giphy would harm competition between social media platforms and remove a potential challenger in the display advertising market.”

But Facebook objected strongly and in September 2021 said the British competition regulator had no authority to intervene on the matter, as Giphy was “a US company with commercial activities strictly limited to the US.”

Following that, the CMA fined Facebook £50.5 million ($69.6 million) for ‘deliberately’ breaching a compliance disclosure order imposed during its investigation into its purchase of Giphy.

Then in November 2021 the CMA ordered Facebook to sell-off Giphy after it decided the remedies offered by the American company did not answer its concerns.

But in December 2021, Meta confirmed it was appealing against the CMA decision, saying the evidence does not support the CMA finding that the deal is a threat to its rivals or could impact competition in display advertising

The CMA order was the first time the British regulator had blocked a major digital acquisition, and it signalled a step change in its scrutiny of ‘big tech’ companies.