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Facebook parent Meta ordered by UK competition regulator to sell Giphy

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Facebook and Giphy logos.

Aytac Unal | Anadolu Agency with Getty Images

MetaThe Facebook owner conceded defeat on Tuesday after UK competition regulators made a final decision ordering the company to sell its animated image-making unit, Giphy.

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

A Meta spokesperson said in a statement that the company is “disappointed with the CMA’s decision, but accepts today’s decision as the final word on the matter.”

“We will work closely with the CMA on the divestment of GIPHY,” a Meta spokesperson told CNBC. “We are grateful to the GIPHY team for their work during this uncertain time and wish them the best. We will continue to seize opportunities – including through acquisition – to bring innovation and choice to more people in the UK and around the world.”

In November, the CMA ordered Meta to divest Giphy after it found that the merger of the two companies raised competition concerns. Meta tried to appeal the decision. However, in June, a court largely ruled against the company’s appeal, sending the final decision on the fate of the deal back to the CMA. After a quarterly review, a CMA panel decided that the deal would allow Meta to further increase its market power.

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

GIFs are ‘going crazy’

In a court filing in August, Giphy tried to downplay the importance of Meta’s takeover of the company with an unorthodox argument – its core product offering was outdated, so there wouldn’t be another company willing to buy it.

GIFs are “outdated as a content format, with younger users specifically describing gifs as ‘boomers’ and ‘cringe’,” the company said in the filing. Giphy added that it has seen a decline in the number of GIF uploads over the past two years.

However, CMA has addressed the issues with the takeover – particularly with the impact it will have on the UK display advertising market. Meta controls nearly half of the UK’s £7bn ($7.9bn) display market.

“Before the merger, Giphy offered innovative advertising services in the US and was considering expanding to other countries, including the UK,” the regulator said. Said. Such services would allow brands like Dunkin’ Donuts and Pepsi to promote their brands through GIFs.

In its decision to block the deal, the CMA also addressed the possibility of Giphy giving up on its digital advertising ambitions. Giphy had plans to launch its own ads, but these were canceled by Meta after the takeover was completed in 2020, according to the editor. This effectively “eliminates Giphy as a potential competitor in the UK display advertising market,” said the watchman.

The CMA said that Meta’s acquisition of Giphy would restrict rival social media firms’ access to the platform’s GIFs and redirect users to Meta’s own services. He added that the move could lead to Meta changing its terms of service to curb competition, for example by requiring Giphy customers, like China’s TikTok, to provide more data from their UK users to secure continued access to their GIFs.

important move

It’s the first time a global regulator settles a deal completed by a Big Tech company. CMA seeks to become a greater force in the war between global regulators to rein in Big Tech companies.

Alongside the European Commission, the EU’s executive arm, there are multiple high-profile investigations underway against companies like Meta, Google and Apple, asking the government to impose greater penalties against tech giants for violating competition laws.