Thursday, August 11, 2022

UK regulator orders Meta to sell Giphy

HomeNewsUK regulator orders Meta to sell Giphy

The UK’s competition authority has concluded that Facebook holding company Meta‘s purchase of Giphy should be reversed, about an over a year and half after the social media giant initially announced the deal. The Competition and Markets Authority (CMA) stated in a press release that it reached this conclusion after concluding that an acquisition would impede competition between social media platforms and that its concerns “can only be addressed by Facebook selling Giphy in its entirety to an approved buyer.”

The CMA said that the purchase might be used to prevent or restrict access to Giphy GIFs on other platforms, therefore boosting traffic to Facebook, WhatsApp, and Instagram. Additionally, it sparked fears that it may be used to request additional data from other sites in order to obtain the GIFs. Finally, the CMA considers Giphy’s advertising services might have competed with Meta’s but were discontinued as a consequence of the transaction.

“The tie-up between Facebook and Giphy has already eliminated a prospective competitor in the display advertising industry,” said Stuart McIntosh, head of the independent investigation panel. “Without action, it will also enable Facebook to bolster its already sizable market share in social media by limiting rivals’ access to Giphy GIFs.”

“By ordering Facebook to sell Giphy, we safeguard millions of social media users while fostering competition and innovation in digital advertising,” McInosh added.

This might be the first time the CMA tried to reverse a completed purchase by a technology firm, as previously reported by the Financial Times. While Meta may appeal the ruling, the UK regulator’s decision establishes a significant precedent for future large-scale technology acquisitions.

While the CMA’s judgement is ground-breaking, it comes as little surprise given that the CMA’s initial investigations report from August recommended that the agreement be undone.

Meta’s EU head of policy communications, Robin Koch, said in response to the judgement that the business is exploring all available options, including an appeal. “Both customers and Giphy benefit from our infrastructure, expertise, and resources,” Koch told The Verge. “By combining forces, Meta and Giphy will better Giphy’s offering for the consumers, companies, developers, and API partners that use Giphy on a daily basis in the UK and throughout the globe, giving additional options for everyone.”

Meta has previously rejected the CMA’s competition concerns, claiming that Giphy’s advertising business was never a credible rival. Meta asserted in reply to the regulator’s examination that Giphy had “a substantial audience of its own,” and when it launched the purchase, Meta stated that it generated 50% of Giphy’s traffic. Additionally, it said that “developers and API partners would retain the same level of access to Giphy’s APIs.”

Meta stated in response to the CMA’s preliminary conclusions that the regulator was “sending a negative message to start-up business owners: do not develop new businesses because they will be unable to be sold.”

Although Meta committed to cooperate with the CMA’s inquiry, the agency recently penalised the business $70 million for violating the conditions of its original enforcement order. Meta was “intentionally refusing to provide all relevant information” about its cooperation with the order, the regulator said.

Giphy had garnered $150 million in capital since its inception, but had failed to generate a profit and was apparently bleeding money prior to its sale. Its market value to Meta was $315 million, just under an investor-provided estimate and indicative of the company’s financial difficulties. While the CMA’s inquiry is underway, Giphy’s more than 100 workers have been unable to transition to full Meta employment, despite the fact that Meta has apparently been paying the company’s costs.

The CMA’s probe is part of a broader trend of scrutiny directed at technology acquisitions in recent years, and stands in striking contrast to the ease with which Meta acquired entrepreneurial growth like Instagram, WhatsApp, and Oculus. Numerous authorities, including the European Union, have launched investigations into Meta’s purchase of Kustomer, a commercial customer support platform. Furthermore, the CMA has objected to Nvidia’s acquisition of chip designer Arm, another merger that has under intense antitrust attention from authorities worldwide.