‘Final Word’: Facebook Parent Meta Ordered to Sell Giphy After Landmark Ruling by UK Regulator

A car passes Facebook's new Meta logo on a sign at the company headquarters in Menlo Park, Calif., on Oct. 28, 2021. Tony Avelar/AP Photo

Meta this week accepted a reissued ruling by the British competition regulator to divest itself of its social media animation unit, Giphy.

The decision by the Competition and Markets Authority (CMA) was first announced last year, which Meta unsuccessfully appealed.

The CMA again declared on Oct. 18, that Meta’s acquisition of Giphy would allow it to “limit other social media platforms’ access to GIFs, making those sites less attractive to users and less competitive.”

Citing the risk of ownership towards competition in social media and display advertising, the government authority said that Meta must “sell GIPHY, in its entirety, to a suitable buyer,” saying that this was its “final decision.”

“This deal [Meta buying Giphy] would significantly reduce competition in 2 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,” said Stuart McIntosh, chair of the CMA’s independent investigatory panel in an Oct. 18 statement.

“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.”

The landmark decision is the first time a global regulator has forcefully decoupled an acquisition by a Big Tech company, reported Bloomberg.

Meta said it was “disappointed by the CMA’s decision but accept today’s ruling as the final word on the matter,” in a statement to Business Insider.

“We will work closely with the CMA on divesting GIPHY ... We will continue to evaluate opportunities – including through acquisition – to bring innovation and choice to more people in the UK and around the world.”

US Big Tech Versus European Regulators

The California-based tech giant, which gained control of Giphy in May 2020, for $400 million, was already the parent company of Facebook, Instagram, WhatsApp, and Oculus. The social media company immediately gained control of half of the U.K.’s $8 billion online advertising market by removing Giphy as a challenger.

The CMA immediately started to investigate Meta after its acquisition of the graphics firm, in a review lasting from June 2020 to October 2021.

The CMA originally made its decision in November 2021 ordering Meta to divest Giphy, after it declared the merger as a threat to competition.

The logo of Meta Platforms in Davos, Switzerland, on May 22, 2022. Arnd Wiegmann/Reuters

Meta was also fined $70 million after multiple warnings for failing to report all of the required information regarding its future competition practices, after buying Giphy, according to Business Insider.

The regulatory authority said that the American tech giant would have the power to limit its social media rivals’ access to GIFs, such as TikTok, Twitter, and Snapchat, and force them to provide valuable user data in the U.K. in exchange.

Meta was also able to absorb Giphy’s in-house advertising services into its own system after the acquisition.

Meta Appeal

Meta appealed the U.K. authority’s decision by issuing six objections.

“We strongly disagree with the CMA’s unfair decision to punish Facebook for a best effort compliance approach, which the CMA itself ultimately approved,” said a Facebook spokesperson to Reuters last year.

“We will review the CMA’s decision and consider our options.”

Giphy attempted to uphold Meta’s takeover in its appeal in August, explaining that its graphics offerings were already losing market profitability and that they needed a buyer after two years of a decline in uploads.

GIFs “have fallen out of fashion as a content form, with younger users in particular describing gifs as ‘for boomers’ and ’cringe,'” Giphy reported in its U.K. filing.

However, the U.K.’s Competition Appeal Tribunal (CAT) upheld the CMA’s decision made last year on five of the six challenges.

The European Commission already has several ongoing investigations into big tech companies.

The CMA said it plans on levying more fines against tech giants over breaches of competition law if given more authority by parliament.

Reuters contributed to this report.