The UK’s Competition and Markets Authority (CMA) started reviewing the $400 million takeover a month after it was announced in May 2020, to establish if the acquisition would result in “a substantial lessening of competition within any market or markets in the UK for goods and services.”
The CMA published provisional findings in August 2021, and have now officially confirmed that Meta’s acquisition of the GIF maker would reduce competition between social media platforms.
The findings argued that the acquisition had eliminated Giphy as a competitor in the display marketing space by only increasing Meta’s dominant market power in relation to other social media services.
The CMA stated that the acquisition enabled Meta to deny or limit other platforms’ access to Giphy’s GIFs to suit traffic on its own platforms which include Facebook, Instagram, and WhatsApp. Meta already dominates the UK market, with 73% of user social media time spent on its platforms.
According to the CMA, the deal may also see Meta change the terms of access to Giphy for other social media companies, allowing it to require more user data from other apps (such as TikTok, Twitter, and Snapchat) in order to access Giphy GIFs.
“The tie-up between Facebook and Giphy has already removed a potential challenger in the display advertising market,” said independent inquiry group chair Stuart McIntosh.
“Without action, it will also allow Facebook to increase its significant market power in social media even further, through controlling competitors’ access to Giphy GIFs.”
Before the merger, Giphy proved a strong competitor in display advertising against Meta and Facebook. The CMA discovered that Giphy had launched advertising such as branded GIFS, which it aimed to expand beyond the US to markets to other countries such as the UK.
Other than competing with Meta’s advertising services, the CMA said that this would have boosted innovation in the display advertising sector from other social media sites and advertisers, adding that the tech company already controls nearly half the £7 billion display advertising market in the UK.
“By requiring Facebook to sell Giphy, we are protecting millions of social media users and promoting competition and innovation in digital advertising,” added McIntosh.
Meta could opt to appeal the decision. Earlier this year, in response to the provisional findings, Meta said the CMA was “sending a chilling message to start-up entrepreneurs: do not build new companies because you will not be able to sell them.”
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