CMA Reconsiders Order For Meta To Sell Giphy

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

The British competition authority has confirmed to Silicon UK that it will “reconsider” a landmark ruling against Facebook mother Meta in the next three months.

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

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

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 of the Competition Appeal Tribunal reaffirmed the CMA’s approach to assessing mergers that could harm innovation,” the CMA spokesperson told Silicon UK.

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

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

Obviously, the Competition Appeal Tribunal found that the CMA had not shared a fully unedited version of the CMA’s preliminary findings and final report with Meta’s outside advisors, hence its decision.

It is thus understood that Meta will now have an opportunity to comment on the CMA’s final report, which the CMA adopts as the preliminary findings of the transfer, after its outside advisors have access to a completely unedited version.

Controversial deal?

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

Both companies are headquartered in the United States.

But in June 2020, the UK competition authority got involved, saying Giphy was doing business in the UK.

The CMA examined whether the $400 million (£317 million) deal “has led or will lead to a significant reduction in competition in a UK market or markets”.

The CMA began its first investigation in January 2021, and after the initial investigation, the CMA said that if the two companies continue to merge, Giphy could have fewer incentives to expand its digital advertising.

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

The deal raised competition concerns because Giphy is widely used on social media, and while Facebook said half of Giphy’s traffic comes 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

Things got more worrisome for Mark Zuckerberg in August 2021, when the CMA “preliminarily found that Facebook’s merger with Giphy would hurt competition among social media platforms and remove a potential challenger in the display advertising market.”

But Facebook strongly objected, saying in September 2021 that the UK competition regulator had no jurisdiction to intervene in this matter, as Giphy was “an American company with commercial activities strictly limited to the US.”

Thereafter, the CMA fined Facebook £50.5 million ($69.6 million) for “deliberately” violating a compliance disclosure order imposed during the investigation into the Giphy purchase.

In November 2021, the CMA ordered Facebook to sell Giphy after it decided the remedies offered by the US company did not address its concerns.

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

The CMA order marked the first time the UK regulator had blocked a major digital takeover, and it marked a step change in the oversight of ‘big tech’ companies.