Facebook parent company Meta has been ordered by the UK competition watchdog to sell gif creation website Giphy, the first time that the regulators have tried to block a deal struck by one of the Silicon Valley giants.
The Competition and Markets Authority provisionally ruled in August that a sell-off was the only way to solve competition concerns, and said the move would protect millions of social media users and stop Facebook's influence on social networks. CMA launched an investigation last year into Meta's $400 m 290 m takeover of Snapchat, TikTok and Twitter, after it identified competition concerns.
The regulators said Meta could cut off the supply of gifs to rivals or demand more user data from them in order to keep using Giphy. A takeover would remove a potential competitor from the 7 billion UK display advertising market, where Facebook is the biggest player accounting for about half of the market, according to the CMA.
The CMA said that it was particularly concerning that Facebook had shut down Giphy's advertising services, which the company was about to expand at the time of the merger.
Stuart McIntosh, chair of the independent inquiry group that carried out the CMA's in-depth investigation into the deal, said by requiring Facebook to sell Giphy, we are protecting millions of social media users and promoting competition and innovation in digital advertising. Without action, it will allow Facebook to increase its market power in social media, by controlling competitors access to Giphy gifs. Meta is yet to respond to the CMA's decision, but is thought to appeal against the decision. Responding to the CMA's provisional findings in August, which indicated that a sell-off of Giphy was the only option, it accused the UK regulators of engaging in extraterritorial over-reach and sending a chilling message to entrepreneurs: do not start new companies because you won't be able to sell them. In October, the CMA fined Meta 50.5 m for deliberately refusing to provide information to prove it was following an order to keep Giphy's business separate from Facebook during the investigation period.
Joel Bamford, a director of mergers at the CMA, said this should serve as a warning to any company that thinks it is above the law.