UK market regulator authorize Facebook to sell Giphy

· Meta disagrees with the decision and said it’s considering an appeal

· Facebook said it wants to integrate Giphy more into the Instagram app “so that people can find just the right way to express themselves”

The United Kingdom's top market regulator has ordered Facebook (which has recently rebranded itself 'Meta') to sell the social-media animated-images start-up Giphy after determining that the transaction might hurt social media users and UK advertisers. 

The Competition and Markets Authority (CMA) decided Tuesday that Facebook's acquisition of Giphy will diminish competition across social media platforms and that the agreement had already eliminated Giphy as a prospective challenger in the display advertising market.

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A panel determined that by blocking or limiting other sites' access to Giphy GIFs, Facebook might expand its already strong market dominance in relation to other social media networks.

This would drive additional traffic to Facebook-owned sites such as Facebook, WhatsApp, and Instagram, which currently account for 73 percent of user time spent on social media in the United Kingdom, according to the panel.

It would also change the terms of access, for example, requiring TikTok, Twitter, and Snapchat to provide more user data to access Giphy GIFs, CMA said. 

Facebook paid $315 million for Giphy in May 2020, according to documents revealed as part of the Competition and Markets Authority's assessment of the purchase. 

Advertising Market  

Before the transaction, Giphy had established unique advertising offerings that it was exploring spreading to nations other than the United States, including the United Kingdom. Companies such as Dunkin' Donuts and Pepsi used Giphy's services to market their businesses using visual graphics and GIFs.

The CMA determined that Giphy's advertising services might compete with Facebook's own display advertising services. They would also have promoted more innovation from other market participants, such as social networking sites and marketers.

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Moreover, at the time of the transaction, Facebook discontinued Giphy's advertising capabilities, removing a key source of prospective competition.

According to the CMA, this is concerning since Facebook owns nearly half of the £7 billion ($9.4 billion) display advertising industry in the UK.

Stuart McIntosh, Chair of the independent inquiry group carrying out the phase 2 investigation, said in a statementthat the tie-up between Facebook and Giphy has already removed a potential challenger in the display advertising market.

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“By requiring Facebook to sell Giphy, we are protecting millions of social media users and promoting competition and innovation in digital advertising,” he added. 

However, Facebook disagrees with the decision. 

“We disagree with this decision,” Meta said in a statement. “We are reviewing the decision and considering all options, including appeal,” WSJ reported. According to the firm, users and Giphy will be benefited from the infrastructure and resources that Meta can offer. 

(£1 = $1.33)

Source: Gov.uk

Picture Credit: Bloomberg