The American group does not want to part with this huge library of GIFs and announces that it could appeal. This is the first time that he has been ordered to abandon an acquisition.
It’s a thunderclap for the Meta group (ex-Facebook). For the first time in its history, the American company is called upon to dispose of one of its acquisitions. The award was handed down on Tuesday by the British Competition Authority (CMA).
At the end of an 18-month investigation, this regulator has decided: Meta’s takeover of the American company Giphy has generated too many obstacles to competition. “These issues can only be resolved if Facebook resells all of Giphy’s business to an approved buyer.“Writes the authority in its conclusions. The Californian group strongly contests this decision and says it is studying all the options on the table, including that of appealing.
Advertising activities stopped by Facebook
The takeover of Giphy in May 2020 for 400 million dollars seemed a priori trivial. This company is the main platform for sharing GIFs, short humorous video sequences that are widely used on social networks and in messaging. But competition authorities are now determined to detect predatory acquisitions by tech giants, or those that could allow their market power. The green light given in 2012 and then 2014 to the takeovers of Instagram and Whatsapp is seen as mistakes that cannot be repeated.
The CMA therefore opened an investigation into the takeover of Giphy in June 2020. According to its conclusions published on Tuesday, this acquisition is problematic on two points. First of all, “Facebook can increase its already considerable market share by preventing or limiting access to other social networks to Giphy. This would send more traffic back to the group, which already accounts for 73% of time spent on social media in the UK.The regulator also points out that “Facebook could change the conditions of access to Giphy by obliging, for example, TikTok, Twitter and Snapchat to transmit more personal data to it.»
The CMA also claims that Facebook wants to neutralize a potential competitor in the digital advertising market. “Before this acquisition, Giphy had launched advertising initiatives and wanted to extend this service beyond the United States.“, notes the regulator. Or, “Facebook halted Giphy’s advertising business once the acquisition was completed (…) This is particularly worrying when you consider that Facebook accounts for nearly half of the UK display advertising market“.
Relations between Meta and the CMA are strained. In the eyes of Meta, London does not have to get involved in this acquisition which concerns two companies under American law, especially since Giphy has no office in the United Kingdom. “This sends the wrong message to start-up creators: don’t try to create companies because you won’t be able to resell them.“, was annoyed Meta this summer.
The Californian group opted for a risky strategy: it did not listen to the British regulator when the latter ordered it to suspend its merger with Giphy until its investigation was completed. This attitude strongly displeased the CMA, which suffered a fine of 50.5 million pounds in Meta in October. “This is the first time a company has breached a CMA injunction.“, had stated the instance. “This is a major breach that harms our mission» regulation of competition. “This penalty is a warning to companies that believe they are above the law.»
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