UK regulators ask Facebook owner Meta to sell Giphy

The British competition watchdog forced Meta (formerly Facebook) to sell Giphy, an online image platform, for the first time it has lifted a large technology deal that has already been completed.

The Competition and Market Authority, if this $315 million transaction continues, Meta will be able to “enhance its already important market power relative to other social media platforms” Confirmed in a statement Tuesday.

Meta’s current mission is to find buyers who satisfy the CMA for Giphy. Regulators will set a deadline for sales in the coming months in accordance with the law, and will only accept buyers who have promised to develop Giphy into an independent and effective competitor to Meta.

Lawyers said the company may have difficulty selling Giphy because it has no clear buyer. A lawyer said that photo-sharing or messaging platforms are obvious buyers, but admitted that “most of them are owned by Facebook.”

Meta said on Tuesday that it is “reviewing the decision and considering all options, including appeals.” It has four weeks to appeal the decision of the Competition Appeals Tribunal, and according to a person close to the company, it may take this approach.

Then, CAT can suspend the sales process until the appeal result comes out, which may take several months. Due to the high legal threshold required for the decision to revoke the CMA, both companies will face an uphill battle. In May of this year, airline software companies Sabre and Farelogix failed in a CAT appeal against CMA’s decision to block their merger.In that case, Farelogix has no direct customers in the UK and no UK turnover, but The court upheld the verdict The practice of regulatory agencies.

Lawyers were surprised by the CMA’s decision that Giphy, which has no ads, could become Meta’s 7 billion British pound online advertising competitor. According to regulators, Meta controls nearly half of the UK market.

Nicole Carr, Competitive Partner of Linklaters, said: “If there is no merger, Giphy will turn himself into a serious display advertiser… Very bold.”

Peter Broadhurst, a competitive partner at Crowell & Moring Law Firm, stated that this decision is “especially important in this case, the two parties are not actually competing, but they may do so in the future” .

He said: “The decision shows that the CMA will not back down in the face of questions and criticisms about jurisdiction and over-coverage.” “This is the type of transaction that the CMA believes should be reviewed.”

This move is part of a global effort to prevent large technology platforms from acquiring competitors before they become too big and pose a threat to their business. These transactions are known as killer acquisitions. Previously, people worried that Meta’s acquisition of WhatsApp and Instagram should not be approved by regulators.

In its own submission, Meta completely rejected the idea that Giphy could compete with it in the advertising sector, especially considering its financial difficulties and any specific plans to enter the UK market. When the deal was first announced in May 2020, Meta stated that it provided 50% of Giphy’s traffic and planned to “further invest in its technology and relationships with content and API partners.”

CMA has been following the transaction between Giphy and Meta since June last year, and officially launched the first phase of the investigation in January this year. Regulators have broad discretionary powers to review transactions that touch the UK market, and have begun to specifically prevent anti-competitive large-scale technology transactions.

Nelson Jung, a competitive partner at Clifford Chance, said that the CMA has proven itself to be a “toothed” regulator. He said that through this intervention, the CMA has proved that it “has the ability to eliminate anti-competitive transactions even if it is not centered in the UK.”

According to the CMA’s ruling, Meta can prevent competitors from accessing gifs, which are short for “graphics interchange format”, which refers to short films that loop animation and bring more traffic to their website. In the UK, Meta accounts for 73% of the time users spend on social media. CMA believes that Meta can also ask competitors such as TikTok to provide more data in exchange for gifs.

CMA stated that the deal will reduce competition in the UK’s £7 billion display advertising market. Giphy has allowed U.S. companies to promote their brands through GIFs in the past, and CMA has stated that it can be extended to the U.K.-the company denies this.

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