The UK Competition and Markets Authority found that the deal reduces competition between social media platforms.
After months of anticipation, the UK competition authority investigating Facebook’s acquisition of Giphy has finally come to a conclusion: the company now known as Meta needs to sell the GIF maker.
The UK’s Competition and Markets Authority (CMA) began reviewing the reported $400m deal just a month after it was announced in May 2020, to determine if the acquisition would result in “a substantial lessening of competition within any market or markets in the UK for goods or services”.
Following provisional findings published in August of this year, the CMA has now confirmed its stance on the deal, saying that Meta’s acquisition of Giphy would reduce competition between social media platforms.
It argued that the acquisition had already removed Giphy as a potential competitor in the display marketing space, increasing Meta’s already significant market power in relation to other social media services.
According to the CMA, the acquisition would give Meta the power to deny or limit other platforms’ access to Giphy GIFs in a way that benefits traffic on its own platforms Facebook, WhatsApp and Instagram, which already account for 73pc of user time spent on social media in the UK.
The CMA said that the deal could also see Meta change the terms of access to Giphy for other social media companies. This could potentially allow it to require more user data from apps such as TikTok, Twitter and Snapchat in order to access Giphy GIFs.
“The tie-up between Facebook and Giphy has already removed a potential challenger in the display advertising market,” said Stuart McIntosh, chair of the independent inquiry group that carried out the in-depth CMA investigation.
“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.”
Giphy was a strong potential competition for Meta and Facebook in display advertising. The CMA found that Giphy had launched innovative advertising services before the merger, such as allowing branded GIFs, which it intended to expand beyond the US to markets including the UK.
Apart from competing with Meta’s own advertising services, the CMA said that this would have boosted innovation in the sector from other social media sites and advertisers, noting that the tech company already controls nearly half the £7bn display advertising market in the UK.
“By requiring Facebook to sell Giphy, we are protecting millions of social media users and promoting competition and innovation in digital advertising,” added McIntosh.
Meta may now appeal the decision. In response to the provisional findings earlier this year, the company said the CMA was “sending a chilling message to start-up entrepreneurs: do not build new companies because you will not be able to sell them”.
Last month, the CMA fined Facebook £50.5m for “failure to comply” with its orders relating to the investigation into the takeover deal. The competition watchdog accused the company of “consciously refusing to report all the required information” for the investigation’s initial enforcement order.
Don’t miss out on the knowledge you need to succeed. Sign up for the Daily Brief, Silicon Republic’s digest of need-to-know sci-tech news.