Not Today, Facebook: Another look at the CMA’s order for Meta to sell Giphy

December 18, 2021

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2 min read

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What's going on here?

The Competition and Markets Authority (CMA) has ordered Meta (Facebook’s parent company) to sell Giphy, the online gif creation platform and largest supplier of gifs to social networks. This is the first time the CMA has moved to unwind a completed digital Big Tech deal.

What does this mean?

In its statement, the CMA confirmed that without action, the $315m deal would allow Meta to “increase its already significant market power in relation to other social media platforms”. By ruling that Meta must sell Giphy, the UK watchdog aims to protect millions of social media users and promote competition and innovation in digital advertising.

With the UK authority’s decision, Meta is now tasked with finding a new buyer for Giphy that meets the CMA’s requirements. A deadline will be set in the coming months and the only buyer the CMA will accept is one who will develop Giphy as an independent and effective rival to Meta. A spokesperson for Meta said that the company will be “reviewing the decision and considering all options, including appeal”.

What's the big picture effect?

The CMA has drawn a line in the sand for any future purchase Meta may make in the social media space. Although Meta could appeal the decision, the UK watchdog’s decision has set a significant precedent for future Big Tech purchases which reflects the more high-profile role it’s taking in Big Tech. 

When compared to Facebook’s other more known acquisitions, Giphy is somewhat small. For example, in 2012, Facebook acquired Instagram for $715m, and two years later, acquired WhatsApp for $19bn in 2014. So the CMA’s move to end the deal reflects the regulatory authority’s attitude towards smaller acquisitions that can also damage competition. It also shows that regulators will now be on ‘high alert’ for purchases known as “killer acquisitions” where an established company purchases an innovative startup in an attempt to stifle the competition it could pose in the future.

Outside of this deal, it can be observed that the UK watchdog is becoming increasingly interventionist. This is particularly because due to Brexit; the CMA no longer has to direct bigger deals to the European Commission. Prior to Brexit, it previously could not pursue cases already under EU review, however, the regulator now has the jurisdiction to investigate mergers potentially impacting the UK. The effects of such increased involvement are reflected by the fact that since 2019, 69% of mergers marked by the CMA for extensive investigations ended up cancelled or deserted. Therefore, from a regulatory perspective, it is perhaps clear that moves in this area are set to cast a critical eye over any Big Tech deals of the future.

Report written by Goodness Asalou

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