Marking the first time a global regulator has unwound a completed deal by a Big Tech company, the U.K.’s Competition and Markets Authority (CMA) has said Meta must “sell GIPHY, in its entirety, to a suitable buyer.”
The CMA cited as the reason for its decision the risk of a substantial lessening of competition in social media and display advertising. Meta currently controls nearly half of the U.K.’s £7 billion ($7.9 billion) display advertising market.
A spokesperson for Meta said in a statement that it was disappointed by the CMA’s decision but 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 U.K. and around the world.”
Meta was order by the CMA in November 2021 to divest Giphy after it decided that the combination of the two companies would have a detrimental effect on competition. Meta appealed, but in June another court largely ruled against the appeal and kicked responsibility for the final decision back to the CMA. After a three-month review, a CMA panel ruled that the deal could not go through because it would allow Meta to further increase its market power.
The prospect of Giphy relinquishing its own ambitions in digital advertising also motivated the CMA’s decision to block the deal. Before the Meta takeover was completed in 2020, Giphy had plans to launch its own ads. These plans were quashed by Meta, which effectively “removed Giphy as a potential challenger in the U.K. display advertising market.”
Meta’s purchase of Giphy would also have restricted the access of rival social media firms to the platform’s GIFs, which would have driven users to Meta’s own services, according to the CMA. Meta could then have changed its terms of service to stifle competition — for example, by requiring Giphy customers to provide more data from users in order to secure continued access to its GIFs.
Alongside the EU’s executive arm (the European Commission), the CMA is currently conducting several high-profile investigations into Big Tech companies like Meta, Google, and Apple. Its goal is to obtain the power from the government to levy larger fines against tech giants when they breach competition law.