The battle between Facebook owner Meta Platforms and the UK’s Competition and Markets Authority (CMA) has resulted in a setback for Mark Zuckerberg and co.
Back in April Meta Platforms appealed a decision by the CMA to the Competition Appeal Tribunal (CAT), after the British competition watchdog ordered Facebook to sell-off Giphy, the provider of humorous short looping videos (Gifs).
Meta appealed on six issues. But the Competition Appeal Tribunal has dismissed the majority of Meta’s appeal, and agreed with the CMA’s position that the Giphy acquisition harms competition.
Indeed, the Competition Appeal Tribunal dismissed five of Meta’s appeal issues, and only one (known as Ground 4) did Meta see some success – but the Tribunal only upheld the second element of Ground 4.
“In respect of the first element of Ground 4, the Tribunal doubted whether the CMA can be criticised for making insufficient inquiries of any person assuming there was proper consultation and saw no basis for suggesting that the CMA’s investigation was impeachable on a judicial review,” said the CAT.
“In respect of the second element of Ground 4, the CMA failed to properly consult and wrongly excised portions from the Decision.”
“We welcome this resounding endorsement by the Competition Appeal Tribunal of the CMA’s approach to reviewing mergers that may harm innovation,” said CMA Chief Executive Andrea Coscelli.
“Innovation is a vital part of the competitive process, particularly in digital markets. We also welcome the Tribunal’s endorsement of the ‘care and careful consideration’ given to this issue by the independent Inquiry Group in this case,” said Coscelli.
“This judgement helps reinforce our ability to protect competition and innovation in digital markets,”Coscelli concluded.
The CMA said the Tribunal upheld the CMA’s decision on 5 of the 6 challenged grounds.
In particular, the CAT had “no hesitation” in concluding that the CMA’s finding that the merger between Meta and Giphy substantially reduced dynamic competition was lawful.
The CMA said the Tribunal only found in Meta’s favour in relation to the treatment of certain third-party confidential information. The Tribunal considered that the CMA’s approach to disclosure in this case overly favoured confidentiality concerns of third parties. The impact of this on the CMA’s decision will be determined in due course.
“Today’s ruling found that the CMA’s approach to its investigation was ‘difficult to defend’ and ‘undermines the entirety of the decision’,” a Meta spokesperson meanwhile told Reuters.
So what now?
Well the CAT could choose to quash the entire decision and send the case back to the CMA for re-investigation.
But the CMA would likely reach the same findings and prohibit the deal, but only after proper consultation on the material that was previously withheld from Meta.
The real issues with this case began 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.”
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 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