The U.K.’s Competition and Markets Authority has ordered social media giant Meta, formerly known as Facebook, to sell GIF provider Giphy. The move requires Meta to unwind a $400 million deal that it believed completed in May.
Meta disagrees with the decision and is considering an appeal.
In August this year, the CMA provisionally found that Facebook’s 2020 takeover of Giphy would negatively impact competition between social media platforms. In October, the CMA fined Meta $69.1 million for failing to provide regular updates on the the compliance process it had required.
Now, the CMA has concluded that the “acquisition of Giphy would reduce competition between social media platforms and that the deal has already removed Giphy as a potential challenger in the display advertising market.” The CMA investigating panel said that Meta would be able to unfairly increase its market power by denying or limiting other platforms’ access to Giphy GIFs thereby driving more traffic to Facebook, WhatsApp and Instagram, which already account for 73% of user time spent on social media in the U.K.
The panel also found that the merger could change terms of access by requiring TikTok, Twitter and Snapchat to provide more user data in order to access Giphy GIFs. The CMA expressed concern that Meta had terminated Giphy’s display advertising services, which the body described as “innovative” and had the potential to compete.
“The CMA considers this particularly concerning given that Facebook controls nearly half of the £7 billion [$9.3 billion] display advertising market in the U.K.,” the CMA said in a statement.
“After consulting with interested businesses and organizations – and assessing alternative solutions (known as ‘remedies’) put forward by Facebook – the CMA has concluded that its competition concerns can only be addressed by Facebook selling Giphy in its entirety to an approved buyer,” the statement added.
A Meta spokesperson told Variety: “We disagree with this decision. We are reviewing the decision and considering all options, including appeal. Both consumers and Giphy are better off with the support of our infrastructure, talent, and resources. Together, Meta and Giphy would enhance Giphy’s product for the millions of people, businesses, developers and API partners in the U.K. and around the world who use Giphy every day, providing more choices for everyone.”
Stuart McIntosh, chair of the independent inquiry group carrying out the investigation, said: “The tie-up between Facebook and Giphy has already removed a potential challenger in the display advertising market. Without action, it will also allow Facebook to increase its significant market power in social media even further, through controlling competitors’ access to Giphy GIFs.”
“By requiring Facebook to sell Giphy, we are protecting millions of social media users and promoting competition and innovation in digital advertising,” McIntosh added.