Last year Facebook (now Meta) acquired Giphy, the popular platform of sharable animated images, in a deal worth around $400 million, and now the latest news is that the UK’s competition watchdog has told Facebook owner Meta to sell GIF-sharing platform Giphy in Britain’s first such move against so-called Big Tech in its efforts to bolster regulation of the sector.
The Competition and Markets Authority said Tuesday the deal could harm social media users and U.K. advertisers. Meta said that it disagrees with the decision and that it’s considering an appeal. The regulator concluded that Meta’s acquisition of Giphy would reduce competition between social media platforms. It added that the deal has already removed Giphy as a potential challenger in the display ad market.
A panel found that Facebook would be able to increase its already significant market power in relation to other social media platforms by denying or limiting other platforms’ access to Giphy GIFs. This in turn would send more traffic to Facebook-owned sites – Facebook, WhatsApp, and Instagram – which already account for 73% of user time spent on social media in the U.K., the panel concluded.
Meta could also change the terms of access to Giphy’s GIFs, the CMA said. For example, it could require the likes of TikTok, Twitter, and Snapchat to provide more user data in order to access Giphy GIFs.
Impact on advertising
Prior to the deal in May last year, Giphy launched its own advertising services and it was considering expanding to countries outside the U.S., including the U.K. Giphy’s ad services allowed firms like Dunkin’ to promote their brands through visual images and GIFs.
The CMA found that Giphy’s ad services would have been able to compete with Facebook’s own display advertising services, while also encouraging innovation from other social media sites and advertisers. Facebook shut down Giphy’s advertising services at the time of the merger. The CMA said this is a cause for concern, especially because Facebook controls nearly half of the £7 billion ($9.4 billion) display ad market in the U.K.
Stuart McIntosh, chair of the independent inquiry group carrying out the investigation, said in a statement Tuesday that the deal has already removed a potential challenger in the display ad market. “By requiring Facebook to sell Giphy, we are protecting millions of social media users and promoting competition and innovation in digital advertising.” It’s unclear how long Meta will have to sell Giphy.
“We disagree with this decision,” a Meta spokesperson said Tuesday. “We are reviewing the decision and considering all options, including appeal.”
In August, the CMA said it had provisionally found Meta’s (still called Facebook at the time) purchase of Giphy would harm competition between social media platforms and remove a potential challenger in the display ad market. At the time, the CMA said it may require the company to unwind the deal, which is reportedly worth $400 million, and sell off Giphy if its competition concerns are ultimately confirmed.
When the deal was announced, Facebook said it wanted to further integrate Giphy into the Instagram app “so that people can find just the right way to express themselves.” The CMA fined Facebook £50.5 million in October for failing to provide regular updates to show that it is complying with an order. It said Facebook “significantly limited the scope of those updates” despite repeated warnings.
