Facebook mom Meta admits defeat after a $400m Giphy deal is blocked by UK regulators

Facebook and Giphy logos.

Itak Unal | Anadolu Agency via Getty Images

deadThe owner of Facebook conceded defeat on Tuesday after UK competition regulators issued a final ruling ordering the company to sell its motion picture-making unit Giphy.

The Competition and Markets Authority said on Tuesday that Meta should “sell GIPHY in its entirety to a suitable buyer,” citing the risks of significantly underestimating competition in the social media and display advertising market. It is not yet clear which company will step in to buy Giphy.

In a statement, a Meta spokesperson said the company was “disappointed with the CMA’s decision but accepts today’s ruling as the last word on the matter.”

“We will work closely with the CMA to liquidate GIPHY,” a Meta spokesperson told CNBC. “We are grateful to the GIPHY team during this turbulent time for their business, and we wish them every success. We will continue to assess opportunities – including through acquisitions – to bring innovation and choice to more people in the UK and around the world.”

In November, the CMA ordered Meta to ditch Giphy after finding that the combination of the two companies raised competition concerns. Mita tried to appeal the decision. However, in June, a court largely ruled against the company’s appeal, returning the final decision on the fate of the deal to the CMA. After a three-month review, the CMA ruled that the deal would enable Meta to increase its market power.

Meta’s $400 million acquisition of Giphy wasn’t the biggest social media giant. It has spent much larger sums on previous deals, including the $1 billion acquisition of photo-sharing app Instagram and the $19 billion purchase of encrypted messaging platform WhatsApp.

GIFs “Totter”

In a lawsuit in August, Giphy tried to downplay the company’s acquisition by Meta with an unorthodox pretext — its primary product offering was out of fashion, so no other company would be willing to buy it.

In the filing, the company said GIFs have “fallen out of fashion as a form of content, with younger users in particular describing GIFs as ‘for boomers’ and ‘cringe.'” It added that Giphy has seen a decline in GIF uploads in the two years. the last two.

But the CMA has tackled the issue of acquisition – specifically with the impact on the UK display advertising market. Meta controls nearly half of the UK’s £7 billion ($7.9 billion) display advertising market.

“Prior to the merger, Giphy was providing innovative advertising services in the United States and was considering expansion to other countries, including the United Kingdom,” the regulator said. She added that such services would have allowed brands like Dunkin’ Donuts and Pepsi to promote their brands through GIFs.

The CMA also cited the possibility of Giphy abandoning its own ambitions in digital advertising in its decision to block the deal. Giphy had plans to launch its own ads, but Meta scrapped those plans after the acquisition was completed in 2020, according to the regulator. The watchdog said this effectively “displaced Giphy as a potential competitor in the UK display advertising market.”

The CMA said it found that Meta’s purchase of Giphy would have restricted rival social media companies’ access to the platform’s GIFs, driving users to Meta’s own services. It added that the move could lead to Meta changing its terms of service to limit competition – for example, by requiring Giphy customers, such as China’s TikTok, to provide more data from their UK users to secure continued access to its GIFs.

Landmark movement

This is the first time a global regulator has canceled a deal completed by Big Tech. The Capital Markets Authority is seeking to become a bigger force in the battle between global regulators to rein in big tech companies.

Besides the European Commission, the EU’s executive arm, it has several high-profile ongoing investigations into the likes of Meta, Google and Apple, and wants powers from the government to impose bigger fines on tech giants for competition law violations.

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