Meta to sell Giphy to comply with UK ruling

Meta to sell Giphy to comply with UK ruling

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Meta to sell Giphy to comply with UK ruling

The divestment would include all of Giphy's overseas operations

Meta, the parent company of Facebook and Instagram, said on Tuesday that it would comply with the latest ruling by the UK ' s Competition and Markets Authority (CMA) to divest itself of animated image platform Giphy.

A Meta spokesperson told CNBC that the company was disappointed by the British regulator ' s latest decision but it would accept the ruling as the final word on the matter.

"We will work closely with the CMA on divesting Giphy," the spokesperson said.

"We are grateful to the Giphy team during this uncertain time for their business, and wish them every success. We will continue to evaluate opportunities - including through acquisition - to bring innovation and choice to more people in the UK and around the world."

According to Meta, the divestment will include all of Giphy's overseas operations.

Meta was originally ordered by the CMA last year to sell social media GIF library platform Giphy, but the social media giant appealed the ruling.

This summer, a tribunal upheld the CMA's conclusion that the Giphy takeover could lessen competition by removing a rival in online advertising and by limiting access to Giphy's GIF library by other parties.

On Tuesday, the CMA reissued the order to Meta to sell Giphy.

The watchdog said that Meta's acquisition of Giphy might enable Meta to restrict access to GIFs on other social media platforms, making those sites less competitive and less attractive to users.

Additionally, the CMA said that the deal eliminated Giphy as a possible rival in the UK's display advertising sector, blocking British firms from taking advantage of market innovation.

Before the merger, Giphy provided innovative advertising services in the US and was thinking about going international, including in the UK.

"These services allowed businesses, such as Dunkin ' Donuts and Pepsi, to promote their brands through visual images and GIFs," CMA noted. However, Meta stopped Giphy ' s advertising services after acquisition, eliminating a potential advertising option for UK companies.

Given that Meta owns over half of the £7 billion UK display advertising industry, the CMA found this to be troubling. It concluded that in order to prevent the deal's considerable negative effects on the market, Giphy should be sold off in its entirety to a qualified buyer.

The big firms in the technology sector have long been accused by critics of looking for "killer acquisitions" of smaller businesses in order to bolster their market dominance.

The alleged "buy-or-bury" tactic is the focus of a federal lawsuit in the US, which aims to compel Meta to spin off WhatsApp and Instagram. A trial is expected to be held on the Federal Trade Commission's breakup effort in 2024.

The FTC has also filed a lawsuit to stop Meta from buying Within Unlimited, a virtual reality technology firm, on the grounds that the transaction may give Meta more leverage to build a "virtual reality empire."

Meta is fighting both lawsuits.