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UK Regulators Force Meta to Sell Giphy

Meta acquired the GIF repository for $315 million in 2020.

The UK’s Competition and Markets Authority has ordered Meta to sell Giphy, an online GIF repository, they purchased in 2020 for $315 million. Different than memes, GIFs are the fun animated or video snippets people share on social media or via text message to express a mood or reaction like screaming, clapping, or eyerolling. They often feature cute animals or popular TV or movie characters like SpongeBob or Michelle Tanner from Full House. Giphy is one of the largest repositories of GIFs.

In November 2021, the CMA ordered Meta to sell Giphy for antitrust reasons. In their initial ruling, the CMA said that Meta’s ownership of Giphy could limit access to the massive GIF collection by other social media platforms, making them less competitive. The CMA also said the deal was a potential competitor in the UK display advertising market, interrupting their ability to innovate. Meta filed an appeal with the Competition Appeal Tribunal (CAT). In July 2022, the CAT upheld the ruling on five of six issues, saying that the “merger substantially reduced dynamic competition” and that the CMA’s ruling was lawful.

Since then, an independent CMA panel reviewed additional third-party information and new submissions from Meta and Giphy. In an October 18 post, the CMA said Meta would be able to “increase its already significant market power” by denying or limiting the access of other social media platforms (e.g., Twitter, TikTok and Snapchat) to Giphy GIFs or by changing the terms of access to make accessing Giphy GIFs more difficult. The CMA’s final ruling is that Meta needs to sell Giphy in its entirety to an approved buyer to avoid anticompetitive behavior or antitrust issues.

“This deal would significantly reduce competition in two markets. 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,” said Stuart McIntosh, chair of the independent inquiry group that did the additional review. “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.”

Meta accepts ruling

This ruling is the first time Meta has been forced to sell off an acquisition by regulatory authorities. Meta said they accepted the CMA’s ruling and will comply.

“We are disappointed by the CMA’s decision but accept today’s ruling as the final word on the matter,” said a Meta spokesperson in a statement. “We will work closely with the CMA on divesting Giphy.”

Insider Take

This has been a rough week for Meta in terms of antitrust concerns and powerful regulatory agencies. This ruling comes just days after Meta filed a second motion to dismiss a complaint by the FTC to block Meta’s acquisition of Within Unlimited. The FTC amended their complaint, and Meta believes the FTC no longer has any legal basis for their arguments. Regardless of the outcome, these types of cases indicate that regulatory agencies in the U.S. and abroad are taking a closer look at big tech companies and scrutinizing the details of proposed mergers and acquisitions. This seems to be a signal that big tech can expect more oversight in the future, and they should be prepared to show regulators why their actions should be allowed.

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