The UK competition regulator has told Meta, formerly known as Facebook, to sell online image platform Giphy, the first time the watchdog has demanded the unwinding of a completed Big Tech deal.
Regulators were expected to reverse the deal in a move that is seen as an escalation of their assault on Big Tech, the Financial Times reported on Monday. Giphy will now be sold to an “approved buyer”, the CMA said.
The $315m deal, had it gone ahead, would have put the US tech group in a position to “increase its already significant market power in relation to other social media platforms”, the Competition and Markets Authority said in a statement on Tuesday.
The CMA since June last year has been investigating the merger, which brought together the largest provider of gifs in the UK with the biggest player in social media and digital display advertising. The watchdog said its competition concerns could only be resolved by the sale of Giphy in its entirety, despite solutions put forward by Meta.
Meta said it was “reviewing the decision and considering all options, including appeal”.
Stuart McIntosh, chair of the CMA inquiry panel, said: “By requiring Facebook to sell Giphy, we are protecting millions of social media users and promoting competition and innovation in digital advertising.”
Meta could have choked off rivals’ access to gifs, which is short for the graphics interchange format and refers to short takes of looping animation, and driven more traffic to its own site, the watchdog said on Tuesday. Meta accounts for 73 per cent of user time spent on social media in the UK. The CMA argued that Meta could also have demanded more data from rivals such as TikTok in return for gifs.
The CMA said the deal would have reduced competition in the £7bn UK display advertising market, despite Giphy having no presence or plans in that sector. The regulator said nearly half of the market is controlled by Facebook.
Giphy had in the past allowed companies in the US to promote their brands through gifs, and the CMA said it could have expanded into the UK — something the company has denied.
Lawyers said the ruling was evidence of a more aggressive stance by the regulator and could affect merging companies that do not currently compete in the UK market.
Peter Broadhurst, a competition partner at law firm Crowell & Moring, said there could be “challenges going forward for companies trying to do deals where the parties don’t actually compete but could do in the future”.
The CMA’s move comes as part of a global drive to stop large tech platforms buying rivals before they become too big and a threat to their businesses, in deals known as killer acquisitions.
According to data from law firm Linklaters, slightly under 70 per cent of deals that head into “phase 2” investigations in the UK now end in mortality, either because they are abandoned, blocked or unwound, up from 30 per cent between 2014 and 2017.
EU regulators are dusting off old tools to see if they can legally claim jurisdiction over deals where the target has no revenues in the union but where there are concerns that a merger could undermine competition and hurt innovation.
Under proposed tech rules in Brussels, acquisitions that previously were more difficult to detect or block will be under more intense scrutiny following concerns that Facebook’s takeovers of Instagram and WhatsApp should not have been cleared.