British competition regulator, CMA, has reissued an order to Meta to sell GIF platform GIPHY, which was acquired for $400 million in 2020. The CMA ruled that the acquisition could cause a significant reduction in competition in the social media and advertising market. Social media platforms like Twitter, Snapchat and Tiktok all use GIPHY; however, the regulator cited concerns that it would limit the choice across social media platforms and reduce innovation in digital display advertising in the UK.
Significance of the Verdict
This is the first time in the UK a ruling has blocked an acquisition of one of the tech giants. In a court hearing in August, GIPHY downplayed this acquisition by stating that Gen Z is disinterested in GIFs claiming they were for boomers, while stating that they had not had any other offers from companies to acquire GIPHY. However, an independent CMA panel that analyzed third-party evidence found that billions of GIFs were still being searched for on GIPHY in the UK alone.
The watchdog also stated that Meta could limit the rivals’ access to GIFs and could drive users to its platforms. Meta already has a 50% of the market share in display advertising in the UK.
However, Meta is not the only tech giant being investigated. CMA has already launched an investigation against Amazon over its unethical practices of displaying its retail business more prominently than third-party competitors. The competition watchdog is also investigating Microsoft’s purchase of Activision Blizzard. Though Meta is the first tech giant to have been fined, the UK-based regulator has the authority to fine or even force the companies to change their policies.
Meta’s Plans
The CMA had initially published its decision in November 2021 ordering Meta to dispose of GIPHY and was fined £50.5 million for failing to comply with the CMA during the investigation. However, in June, Meta appealed this verdict but didn’t get the desired outcome. The Competition Appeal Tribunal found in the CMA’s favor on all counts but one.
In a statement, Meta said, “We are disappointed by the CMA’s decision but accept today’s ruling as the final word on the matter. We will work closely with the CMA on divesting.”
CMA has fined Meta several times previously for not updating the agency on several issues and violating the initial enforcement orders. Meta was also the first company that CMA penalized for intentionally not providing the required information.
