UK competition watchdog directs Facebook to sell Giphy
UK competition watchdog has stated that Facebook’s acquisition of Giphy would reduce competition between social media platforms and stated that the 2020 deal had already removed Giphy as a potential challenger in the display advertising market
The Competition and Markets Authority (CMA) panel reviewing the merger concluded that Facebook, also known as Meta, would be able to increase its already significant market power in relation to other social media platforms by denying or limiting other platforms’ access to Giphy GIFs.
This would drive more traffic to Facebook-owned sites like WhatsApp and Instagram, which already account for 73 per cent of user time spent on social media in the UK.
The CMA also raised the risk that Zuckerberg-owned Facebook could change the terms of access for other platforms; for example, requiring TikTok and Snapchat to provide more user data in order to access Giphy GIFs.
As part of its investigation, the CMA looked at how the deal would affect the display ad market. It found that, before the merger, Giphy had launched advertising services which it was considering expanding to countries outside the US, including the UK.
These had the potential to compete with Facebook’s services, and encouraged greater innovation in the market. However, Facebook ended Giphy’s ad services at the time of the merger, removing a source of potential competition in the watchdog’s view.
The CMA deemed this especially concerning given that the social media giant controls nearly half of the £7bn display advertising market in the UK.
After consulting with businesses and organisations and assessing alternative solutions put forward by Facebook, the CMA concluded that its concerns can only be addressed by Facebook selling Giphy in its entirety to an approved buyer.
Danni Hewson, financial analyst at broker AJ Bell, called the decision a “bold step” for the watchdog and said: “This move by the CMA will make headlines, but the most important words will be spoken in boardrooms and over video links as tech bosses work out exactly how strong these regulators muscles are and whether the decision will set a precedent other regulators will seek to follow.”
Peter Broadhurst, Partner at law firm Crowell & Moring, commented: “One of the most interesting aspects of this decision will be whether or not it takes into account the horizontal theory of harm (i.e. Meta is big in display advertising and Giphy is a potential entrant) – such a move would suggest challenges going forward for companies trying to do deals where the parties don’t actually compete but could do in the future.”