Goodbye Giphy: Meta’s acquisition of Giphy is to be reversed

December 10, 2021

3 min read

Sign up to our mailing list! 👇

What's going on here?

The UK competition regulator, the Competition and Markets Authority (CMA), has ordered Meta (previously Facebook) to sell Giphy to an “approved buyer”.

What does this mean?

A year-long investigation into Meta’s acquisition of Giphy came to a conclusion on the 30th of November 2021. The UK competition watchdog has ordered Meta to sell Giphy in order to promote competition in the digital market and protect social media users. This is the first time that the CMA has reversed a Big Tech acquisition. The £236m deal was held to have significantly elevated the market power of Meta in comparison to other social media companies. The investigation argued that Meta could have restricted rival platforms’ access to gifs. Similarly, the CMA confirmed that Meta could demand more user data from other tech platforms in order to keep using Giphy. The CMA accused meta of “engaging in extraterritorial over-reach” and “sending a chilling message to start-up entrepreneurs: do not build new companies because you will not be able to sell them”.

What's the big picture effect?

Whether a lack of gifs would actually harm Facebook’s competitors probably isn’t the most interesting point from this decision. This story is particularly noteworthy as regulators are finally addressing their concerns about Big Tech’s dominance through action. 

This investigation comes amid growing global sentiment concerning Big Tech deals and their market dominance. The decision to reverse Meta’s acquisition comes in tandem with a recent publication by the G7. The Compendium of Approaches Improving Competition in Digital Markets highlights the global concern over the state of the digital market. These developments mark a shift towards a more aggressive stance taken by regulators. Competition authorities are working to strengthen institutional capability and build knowledge to ensure they are equipped to address the specific challenges of digital markets. Market concentration and a lack of competition in digital markets enables firms to engage in practices that harm consumers, businesses, and society. The digital market has been particularly susceptible to firms gaining a large and powerful position in the market. Similarly, in the EU, acquisitions that previously were more difficult to detect or block will be subject to more scrutiny following concerns that Instagram and WhatsApp should not have been cleared. 

The ruling is also relevant to companies that do not currently compete in the UK market. The CMA stated that this acquisition would have also reduced competition in the £7bn UK display advertising market, despite Giphy having no presence or plans in the sector. This reasoning stems from the fact that in the US, Giphy has enabled companies to promote their brands through gifs. These ‘pre-emptive’ regulations are significant for companies going forward as the scope for scrutiny is increased. Peter Broadhurst, competition partner at Crowell & Moring, suggested that difficulties will be encountered for “companies trying to do deals where the parties don’t actually compete, but could do in the future”.

Ultimately, this may be a defining moment regarding Big Tech’s dominance. This ruling will undermine Big Tech’s strategies of buying rivals before they become serious competitors. It is an important step in modernising the tools and approaches used by regulators needed to investigate anti-competitive actions in digital markets. Of course, it is likely Meta will appeal the decision, previously citing that “Meta will continue to work with the CMA to address the misconception that the deal harms competition”. However, this groundbreaking decision may enable regulators to finally tame Big Tech.

Report written by William Sutcliffe

Share this now!

Check out our recent reports!