Confirmed: CMA orders Facebook to sell Giphy
The CMA says the deal has already removed Giphy as a potential contender in the display advertising market
The UK's Competition and Markets Authority (CMA) has ordered Facebook (now Meta Platforms) to sell popular animated image platform Giphy, after a probe suggested that the acquisition could harm social media users and UK advertisers.
The ruling was foreshadowed earlier this week, when the story broke in the Financial Times.
The CMA has determined that - in line with its provisional Phase 2 findings issued in August - the Giphy acquisition is likely to limit competition between social media platforms. It believes Facebook could use the acquisition to increase its already significant market power, by limiting or completely denying other platforms' access to Giphy GIFs.
The regulator says the acquisition has already removed Giphy as a potential contender in the display advertising market.
'Facebook terminated Giphy's advertising services at the time of the merger [in 2020], removing an important source of potential competition.
'The CMA considers this particularly concerning given that Facebook controls nearly half of the £7 billion display advertising market in the UK.'
The regulator is also concerned about Facebook altering the terms of access to GIFs in the future by, for example, requiring competitors to provide more user data in order to use Giphy.
After consulting with stakeholders, and assessing alternative 'remedies' proposed by Facebook, the CMA concluded that its concerns can only be addressed when Facebook sells Giphy in its entirety to an approved buyer.
"By requiring Facebook to sell Giphy, we are protecting millions of social media users and promoting competition and innovation in digital advertising," said Stuart McIntosh, chair of the independent inquiry group heading the CMA probe.
Facebook is reviewing the decision and 'considering all options, including appeal'. The firm has four weeks to appeal.
Giphy is a popular website that lets users to make and share animated images, or GIFs. It has a large library of short video animations, which are highly popular among users of Facebook's apps. Giphy also offers animations to rivals like Snapchat, Twitter and TikTok.
In May 2020, Facebook announced that it intended to integrate Giphy with its photo-sharing app, Instagram. It said nearly half of Giphy's traffic comes from various Facebook apps, including Instagram and WhatsApp, and that the acquisition would not impact Giphy's existing deals with other partners.
The CMA was quick to open an antitrust probe into the $400 million (£289 million) takeover. In its preliminary report, the watchdog said it had a number of competition concerns.
'Millions of posts every day on social media sites now include a GIF. Any reduction in the choice or quality of these GIFs could significantly affect how people use these sites and whether or not they switch to a different platform, such as Facebook.'
Facebook was quick to reply, claiming that the CMA's findings contained 'fundamental errors'. It said the proposal to sell its subsidiary was 'grossly unreasonable and disproportionate'.
The company said regulators should carefully weigh 'the intrusive step of ordering the sale of a company which does not carry on business in the UK'. As we said at the time, this is a technicality - despite being headquartered in the USA, both Facebook and Giphy offer their services worldwide and must obey local laws.
Last month, the CMA fined Facebook £50.5 million for a 'major breach' of its order that the company remain separate from Giphy during the investigation.