Meta gives up fight to get $400m Giphy buy approved

Facebook to dump GIF super-gallery after just enough pestering from UK

Meta has thrown in the towel in its protracted legal battle with the UK’s antitrust watchdog over the US giant's $400 million purchase of Giphy. After another ruling against it, the Facebook parent said it will sell Giphy as ordered.

The nation's Competition and Markets Authority (CMA) today outlined its continued concerns about "harm" that could be caused to social media denizens and advertisers if the acquisition of Giphy was allowed to go ahead.

The tale began in May 2020 when Facebook bid nearly half a billion dollars for the GIF mega-gallery. The process was put on ice the following month when the CMA demanded answers to questions about the implications of approving such a sale. Monopoly regulators around the world give the impression they now regret letting Facebook absorb Instagram and WhatsApp back in the day, and have decided to turn up the scrutiny on Meta's latest takeovers.

Facebook said this extra probing and stalling was an “unreasonable compliance burden” and found itself in a Competition Appeal Tribunal after it carried on integrating Giphy.

Fast forward to August 2021 and the CMA ruled that Facebook needed to offload the acquired startup due to concerns that the web goliath would remove Giphy's GIFs from competing platforms and because it would mean one less potential competitive force in the online advertising market.

For lack of a better description, Facebook’s legal team effectively gave the middle finger to the UK regulator, saying in September last year the watchdog's provisional findings were based on “fundamental errors.” The CMA then fined Facebook £50 million ($57 million) for “deliberately” not aiding the probe.

Then a second phase of investigation by the CMA brought a deeper delve into competition implications, beginning in November last year. Following more back and forth with Facebook complaining the buyout ban was “unfair” and “irrational,” the Brits fined the social media biz 0.005 percent of its annual income – £1.5 million ($1.7 million) – for ignoring them.

Facebook again appealed the CMA’s decision, and in June lost on all grounds but one: the CMA knew Snap had considered buying Giphy for $142 million (£126 million) and ultimately bought rival Gfycat. But oops, the regulator had failed to disclose this in its reports as it was deemed confidential information. Meta wanted this “serious flaw” to be addressed.

The CMA agreed to reboot its investigation, the findings of which were released today and haven’t markedly changed since the first round. The CMA said it has analyzed additional third-party evidence and fresh submissions from Meta and Giphy but concluded that approving the sale would increase Meta’s “already significant market power” by:

Denying or limiting other social media platforms’ access to Giphy GIFs, thereby pushing people to Meta-owned sites, which already make up 73% of user time spent on social media in the UK, or elsewhere

Changing the terms of access – for example, it could require Giphy customers, such as TikTok, Twitter and Snapchat, to provide more data from UK users in order to access Giphy GIFs

Further, it ruled an independent Giphy would encourage “greater innovation” from Meta and others, while pointing out Meta had “terminated” Giphy’s ad services upon acquisition, “removing a potential ad tool for UK businesses.”

The only solution according to the CMA is “for Giphy to be sold off in its entirety to an approved buyer.”

Stuart McIntosh, chair of the independent inquiry group carrying out the remittal investigation, said: “This deal would significantly reduce competition in two 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."

“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,” he added.

A Facebook spokesperson told The Register: “We are disappointed by the CMA’s decision but accept today’s ruling as the final word on the matter.

"We will work closely with the CMA on divesting Giphy. We are grateful to the Giphy team during this uncertain time for their business, and wish them every success. We will continue to evaluate opportunities – including through acquisition – to bring innovation and choice to more people in the UK and around the world.”

We have asked the CMA to confirm how much it spent on probing the world of moving images with sounds, which aren’t really even GIFs anyway these days, and have yet to receive confirmation. ®