Tuesday 18 October 2022

It’s Official: Meta Must Sell Giphy

WebProNews
It’s Official: Meta Must Sell Giphy

The UK’s Competition and Markets Authority (CMA) has ordered Meta to sell Giphy after it acquired the company for $400 million in 2020.

Meta announced the acquisition in May 2020 and was planning to integrate the service into Instagram. The CMA has ruled that Meta must divest itself of Giphy, ruling the acquisition would limit consumers’ social media options.

The CMA had initially ruled Meta must sell Giphy in November 2021, but the company appealed the decision.

The CMA published its original Phase 2 decision on this case in November 2021, finding that the deal could harm social media users and UK advertisers, and ordering Meta to sell Giphy. Meta subsequently appealed that decision to the Competition Appeal Tribunal (CAT). In July 2022, the CAT upheld the CMA’s decision on 5 of the 6 challenged grounds. In particular, the CAT said it had “no hesitation” in concluding the CMA’s finding – that the merger substantially reduced dynamic competition – was lawful.

The one point Meta won was purely a procedural issue, but that was enough to prompt the CMA to reconsider its decision, using an independent CMA panel. After further review, however, the panel upheld its initial decision, ordering a sale.

Stuart McIntosh, Chair of the independent inquiry group carrying out the remittal investigation, said:

“This deal would significantly reduce competition in 2 markets,” said Stuart McIntosh, Chair of the independent panel. “It has already resulted in the removal of a potential challenger in the UK display ad market, while also giving Meta the ability to further increase its substantial market power in social media.

“The only way this can be addressed is by the sale of Giphy. This will promote innovation in digital advertising, and also ensure UK social media users continue to benefit from access to Giphy.”

This case will likely serve as a warning to companies that try to circumvent regulation. Despite the regulatory scrutiny Meta is under, the two companies used a legal loophole to push the deal through. Prior to the deal being announced, Giphy paid a dividend to investors, temporarily lowering its value so the deal would fly under the radar.

It’s Official: Meta Must Sell Giphy
Matt Milano



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