Tech

CMA tells Facebooks to sell Giphy, warns of damage to users

The UK competition watchdog has ordered Meta, the owner of Facebook, to sell Giphy after deciding purchase of the animated GIF creator platform will damage rivals, consumers and advertisers.

Today’s directive is effectively the same as that handed down in August, when the Competition Markets Authority voiced concerns that could only be resolved if Facebook was to offload the $400m acquisition it made in May 2020.

The panel that ran their finger over the merger concluded the buy would only tighten Facebook’s already vice-like grip on the social media landscape by:

  • denying or limiting other platforms’ access to Giphy GIFs, driving more traffic to Facebook-owned sites – Facebook, WhatsApp and Instagram – which already account for 73 per cent of user time spend on social media in the UK, or
  • changing the terms of access by, for example, requiring Tik Tok, Twitter and Snapchat to provide more user data in order to access Giphy GIFs.

The purchase of Giphy was signed more than 17 months ago but Meta was so far unable to integrate the business into Zuck’s megacorp, despite Facebook’s protest that it should be allowed to fold in the business while the CMA’s probe ran on.

Just last month the CMA fined Facebook £50m ($68.7m) for “consciously refusing to report all the required information” pertaining to the purchase of Giphy – which had 200 million daily active user and 250 monthly active users in July 2017 – as requested by the regulator.

The CMA said it also closely inspected how the purchase would affect the display advertising industry, again highlighting that prior to Facebook’s interest, Giphy had launched ad services in the US for Dunkin’ Donuts and Pepsi to market their brands via visual images and GIFS. Expansion to other countries, including the UK, was considered.

This ad biz had the “potential to compete” with Facebook’s own ad revenues and Facebook “terminated” this fledgling unit when it announced the takeover, removing a possible threat – something that worried the CMA given Facebook’s control of almost half of the £7bn display ad market in the UK.

After consultations with interested businesses and organisations, the CMA concluded the only way to address those competition worried was by “Facebook selling Giphy in its entirety to an approved buyer”.

“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 at the CMA that undertook the phase 2 investigation.

He added that without action Facebook would be allowed 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 said.

The Reg can’t help but feel that door was already left open when the buys of WhatsApp and Instagram were waved through. Yet somehow this saga might not yet be over.

A Meta spokesperson sent us a statement:

“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 UK and around the world who use GIPHY every day, providing more choices for everyone.”

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