Meta ordered to sell Giphy by UK competition regulator

The UK's competition regulator has ordered Meta to sell the animated GIF platform, Giphy, after finding that the deal could harm social media users and UK advertisers.

The Competition and Markets Authority (CMA) has found that Meta’s (META) takeover of Giphy could allow Meta to limit other social media platforms’ access to GIFs, making those sites less attractive to users and less competitive.

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The CMA also found that the deal between Meta and Giphy has removed the latter as a potential challenger in the UK display advertising market.

The UK competition watchdog found that Meta's ownership of Giphy would negatively impact the display advertising market, because before the merger Giphy was offering innovative advertising services in the US and was considering expanding to other countries, including the UK.

In the summer Meta was given a ‘stay of execution’ after the Competition Appeal Tribunal sent the case back to the antitrust regulator to be reassessed following a procedural finding that the Competition and Markets Authority (CMA) had not provided full, un-redacted disclosure to Meta representatives of documents related to its decision.

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However, the tribunal has now upheld the CMA’s original decision on five of the six challenged grounds.

The review concluded that Meta's ownership of Giphy would increase its already significant market power by denying or limiting other social media platforms’ access to Giphy GIFs.

This could then push consumers to Meta-owned sites, which already make up 73% of user time spent on social media in the UK.

It also found that Meta could potentially change the terms of access to Giphy for competitors such as TikTok, Twitter (TWTR) and Snapchat (SNAP).

On Twitter (TWTR) the Competition and Markets Authority stated: "In November 2021, we ordered Meta to sell Giphy after our phase 2 investigation found that the merger could harm social media users and UK advertisers."

"A review completed by an independent CMA panel has found the only way to address the significant impact the deal would have on competition is for Giphy to be sold to an approved buyer."

In a statement, Stuart McIntosh, chair of the independent inquiry group carrying out the remittal investigation, added: “This deal would significantly reduce competition in two markets. It has already resulted in the removal of a potential challenger in the UK display ad market, while also giving Meta the ability to further increase its substantial market power in social media.

“The only way this can be addressed is by the sale of Giphy.

"This will promote innovation in digital advertising, and also ensure UK social media users continue to benefit from access to Giphy.”

Giphy is a US-based company that provides social media and messaging platforms with animated GIF images that users can embed in posts and messages.

The Competition and Markets Authority (CMA) investigate entire markets to see if they present competition or consumer problems.

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