Meta Appeals Against UK Order To Sell Giphy

Facebook parent Meta continues its fight against the British competition watchdog, after it ordered it to sell-off Giphy, the provider of humorous short looping videos (Gifs).

Meta is reportedly appealing against the decision by the Competition and Markets Authority (CMA), 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, Reuters reported.

The appeal was always likely, considering the history of the deal.

Controversial deal?

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

Both firms were 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 this year, 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 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.

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

Facebook Appeal

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

“We are appealing the CMA’s Giphy decision and will seek a stay of the CMA’s order to divest,” a Meta spokesperson told Reuters on Thursday.

“The decision to block the deal is wrong on the law and the facts, and the evidence does not support the CMA’s conclusions or remedy,” said Meta.

Meta has previously said it would not change the terms of access for competitors, nor collect addition data from the use of GIFs, which have no online tracking mechanisms such as pixels or cookies.

The CMA rejected the remedy, which Meta offered to make legally binding, in part because it would require ongoing monitoring.

The regulator was also concerned Meta had closed down Giphy’s fledgling advertising business, removing a potential source of competition.

Meta said Giphy’s advertising business was unsuccessful, and if it had the potential to become a major competitor its model could be replicated by any other GIF provider.

It argues the deal did not, therefore, meet the threshold of a “substantial lessoning of competition” needed for the CMA to block it, Reuters reported.