Facebook's Giphy slurp remains on hold after UK competition regulator demands more info
Tribunal ruling prevents the Zuckerborg from swallowing GIF peddler until further notice
Facebook remains barred from integrating social media GIF engine Giphy into its wider corporate operations following a failed legal bid.
The UK's Competition and Markets Authority (CMA) prevailed over the social network's arguments that it should be allowed to continue with its merger of Giphy regardless of an ongoing investigation by the regulator.
Ruling out the Zuckerborg's attempt to ignore the CMA and finish its integration of Giphy, the Competition Appeal Tribunal (CAT), which rules on competition law disputes, found on Friday [PDF] that Facebook had no grounds for overturning a so-called Initial Enforcement Order (IEO) imposed by the CMA in June this year.
Giphy is, as the CAT judgment put it, a "supplier of GIFs" to Facebook and other social media platforms. Some platforms have a little button that lets users insert funny GIFs into their messages. That's it. This functionality was reportedly worth $400m to Facebook back in May.
After the deal was announced the CMA opened an investigation into the buyout, issuing a template IEO to halt the purchase until regulators had pored over its implications. Facebook asked the CMA to change the order's terms because (it claimed) the IEO was "an unreasonable compliance burden" for a global business.
In the CAT judges' view, however, Facebook had not supplied enough "necessary information" to the CMA for the regulator to decide whether to modify the IEO, having ignored CMA requests to tell it whether carving out exemptions from the order would let Facebook sidestep the IEO and finish integrating Giphy – regardless of the regulator's investigation.
The IEO banned Facebook from doing anything that would "lead to the integration of the Giphy business with the Facebook business", formally transfer control of Giphy to Facebook or "otherwise impair the ability of the Giphy business… to compete independently in any of the markets affected by the transaction." The CMA also banned things like moving key staff around or integrating IT systems.
CMA chief exec Andrea Coscelli said in a statement: "Companies seeking a reprieve from an IEO must provide sufficient information to the CMA before a decision can be made to release them from parts of it – it is therefore vital that they engage with the CMA as early as possible."
Although Facebook insisted to the CMA that Giphy books no revenues in Britain and that Facebook's own corporate ops are mostly elsewhere in the world, neither the regulator nor the tribunal were convinced by these denials.
A spokesperson for Facebook sent us a statement:
"We are cooperating fully with the UK Competition and Market Authority's inquiry and will continue to do so. We are reviewing the Tribunal's decision and considering our options. This merger is in the interests of everyone who uses GIPHY and our apps - from developers to service providers to content creators." ®