The antitrust watchdog has blocked Facebook's acquisition of Giphy and ordered the social network to sell off the GIF-sharing platform, saying the deal hurts social media users and advertisers by stifling competition for animated images.
The Competition and Markets Authority said Tuesday that the deal would allow Facebook to increase its market power by denying or limiting other platforms' access to Giphy GIFs and driving traffic to Facebook-owned sites. It has previously noted that there is only one other big provider of GIFs, Google s Tenor.
The deal removed the potential competition from the U.K.'s 7 billion pound $9.3 billion display advertising market, of which Facebook controls half, was concerned by the regulator.
It's the first time the watchdog has tried to unwind a tech deal, marking an escalation by regulators trying to tame digital giants.
Facebook, which has been renamed Meta, said it disagreed with the decision and is considering all its options, including an appeal.
The company said that 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 millions of people, businesses, developers and API partners in the U.K. and around the world who use Giphy every day, giving more choices for everyone. After consulting with other businesses and groups and evaluating alternative solutions proposed by Facebook, the watchdog said it concluded that its competition concerns can only be addressed by Facebook selling Giphy in its entirety to an approved buyer. Stuart McIntosh, Chair of the watchdog's independent group that carried out the investigation, said the deal has already removed a potential challenger in the display advertising market. Without action, Facebook will be able to increase its market power in social media, by controlling competitors access to Giphy GIFs, he said. We're protecting millions of social media users and promoting competition and innovation in digital advertising by requiring Facebook to sell Giphy. New York-based Giphy library of short looping videos, or GIFs, is a popular tool for internet users sending messages or posting on social media.
The deal, reported to be worth $400 million, is a bitter battle between the two sides.
In August, the Competition and Markets Authority said that Facebook should be forced to sell Giphy. The social giant wrote a strongly worded letter, saying that the provisional decision contained fundamental errors. The watchdog fined Facebook 50.5 million pounds $67.4 million for failing to provide information needed for the investigation, saying the company's failure to comply was deliberate.
The watchdog said prior to the deal, Giphy had been considering expanding its advertising services to other countries, including the U.K. It would have added a new player to the market and encouraged more innovation from social media sites and advertisers, but Facebook has terminated Giphy's Ad partnerships.