Facebook’s owner Meta has been issued a legally binding order to sell the GIF library Giphy after an investigation found the takeover “could harm social media users and UK advertisers”.
The Competition and Markets Authority (CMA) launched an in-depth investigation into the deal in April after raising a number of concerns. It subsequently warned of the potential forced sale in August.
Giphy – a website for making and sharing animated images, known as GIFs – was acquired by Facebook (now Meta) in May last year to integrate the GIFs with Instagram, but the CMA has now ordered the acquisition to be unravelled.
Sky News understands Facebook intends to appeal the CMA’s decision. It has four weeks to do so and the appeal would go to a CMA tribunal. Meta could potentially challenge that ruling in the UK courts, but only on points of law.
Image: Facebook’s parent company was renamed Meta last monthStuart McIntosh, who chaired the independent inquiry into the acquisition, said: “The tie-up between Facebook and Giphy has already removed a potential challenger in the display advertising market.
Advertisement“Without action, it will also allow Facebook to increase its significant market power in social media even further, through controlling competitors’ access to Giphy GIFs.
“By requiring Facebook to sell Giphy, we are protecting millions of social media users and promoting competition and innovation in digital advertising,” Mr McIntosh explained.
More on Facebook Related Topics: FacebookThe investigation into the acquisition has seen points of acrimony, with Meta being fined a record £50m by the CMA for deliberately refusing to comply with the regulator’s inquiries.
Meta argued that it has been in compliance with the competition watchdog’s primary orders at all times.
At the time of the fine, the company complained that the CMA delayed for seven months a request to amend these orders which was eventually agreed in what the company described as nearly an identical manner to what had been requested.
When Facebook first merged with Giphy it terminated the image library’s advertising services, “removing an important source of potential competition” according to the CMA.
This was considered “particularly concerning given that Facebook controls nearly half of the £7 billion display advertising market in the UK”.
However in Meta’s response to the preliminary findings, the social media giant described the acquisition as a simple vertical merger and said that Giphy was financially troubled and suggested that its attempts to monetise its GIF library for display advertising were unsuccessful.
“If GIF paid alignments were the promising business model that the CMA believes they are, then one would expect to encounter them in the real-world at scale… Yet that is not the case,” the response stated.
According to the regulator, the acquisition potentially also enabled the social media giant to change the terms of access to the GIF library for its competitors.
“For example, Facebook could require Giphy customers, such as TikTok, Twitter and Snapchat, to provide more user data in order to access Giphy GIFs.
“Such actions could increase Facebook’s market power, which is already significant,” the regulator said.
In its review of the merger, the CMA said it risked entrenching Meta’s market dominance, noting that its platforms (Facebook, Instagram, and WhatsApp) already accounted for 73% of all user time spent on social media in the UK.
A spokesperson for Meta said: “We disagree with this decision. We are reviewing the decision and considering all options, including appeal. Both consumers and Giphy are better off with the support of our infrastructure, talent, and resources.
“Together, Meta and Giphy would enhance Giphy’s product for the millions of people, businesses, developers and API partners in the UK and around the world who use Giphy every day, providing more choices for everyone.”
