Technology

U.K. Regulator Orders Facebook to Sell Giphy

"We are protecting millions of social media users and promoting competition and innovation in digital advertising."
Matthew HellerDecember 1, 2021

In what appears to be an unprecedented decision, the British government has ruled that Facebook parent Meta must undo its acquisition of Giphy to protect social media users and promote competition in the animated image market.

Facebook bought Giphy for $315 million in May 2020 to integrate the search engine for animated GIFs with its Instagram photo-sharing app.

But after a 17-month investigation, the U.K.’s Competition and Markets Authority (CMA) said Tuesday it had concluded the deal would be anti-competitive and the only effective remedy would be for Facebook to divest Giphy.

The merger “has resulted or would result in a substantial lessening of competition (SLC) in social media and display advertising,” the CMA said in a report.

According to The Guardian, it is the first time that Britain’s top competition regulator has “demanded a deal involving one of the big tech companies should be unwound.” In June 2020, the CMA ordered a halt to the integration of Giphy by Facebook while the probe was in progress.

“By requiring Facebook to sell Giphy, we are protecting millions of social media users and promoting competition and innovation in digital advertising,” Stuart McIntosh, who led the investigation, said in a news release.

Antitrust concerns have also fueled a Federal Trade Commission lawsuit in the United States alleging Facebook has sought to suppress competition in social media by buying up potential rivals such as Instagram.

The CMA said the ownership of Giphy would increase Facebook’s already “significant market power” by driving traffic to Facebook-owned sites and by denying rivals such as Twitter and Snapchat access to Giphy images or requiring them to disclose more user data as a condition of access.

Among other things, Facebook offered the CMA commitments to preserve access for competitors but the regulator said the company’s proposed remedies would not be effective in addressing the deal’s significant anticompetitive effects.

Meta said it would appeal the decision.

“Together, Meta and Giphy would enhance Giphy’s product for the millions of people, businesses, developers, and API partners in the U.K. and around the world who use Giphy every day, providing more choices for everyone,” it said.