Meta grudgingly agrees to sell Giphy after admitting defeat in UK battle

Meta grudgingly agrees to sell Giphy after admitting defeat in UK battle

Considering that Meta bought WhatsApp and Instagram without issue, it may come as a surprise that Meta’s purchase of Giphy will be blocked. But that’s the situation, as the United Kingdom’s Competition and Markets Authority (CMA) has now ordered Meta to sell Giphy.

The decision comes two years after the merger came under the increasingly intense scrutiny of UK regulators. Fighting every step of the way, Meta has since said in a statement to Reuters that although it’s “disappointed” in the decision, it will “accept today’s ruling as the final word on the matter.”

Among the reasons why Meta must sell Giphy are the CMA’s concerns that Meta and Giphy dominate the GIF marketplace and that Meta could cut off competitors from accessing Giphy content. Meta could also possibly change its terms and charge its competitors exorbitantly for access. This, the CMA feared, threatened to increase Facebook’s already dominant presence in the social media marketplace by pushing users to prefer the platform where they can access the best GIFs. The regulator noted that 73 percent of the time UK residents spend on social media is on Facebook.

Also at issue was Giphy’s prior place in the display advertising market at the time of Meta’s (then Facebook’s) $400 million acquisition. The CMA seemed to suggest that Meta’s acquisition could have been driven by an urge to shut down a budding Giphy display advertising business that could have diversified display ad choices for UK businesses. (Meta told Ars that it believes there is no evidence to suggest this.) In a press release, the CMA said that Meta already controls half of UK display advertising.

“Before the merger, Giphy was offering innovative advertising services in the US and was considering expanding to other countries, including the UK,” the CMA said in the press release. That included attempting to recruit big brands like Dunkin Donuts and Pepsi to purchase promotional GIFs. The CMA reviewed evidence from Meta and Giphy, finding that “Giphy’s advertising services had the potential to compete with those of Meta and would have encouraged greater innovation from Meta and other market players.”

“The only way this can be addressed is by the sale of Giphy,” said Stuart McIntosh, a chair of the independent inquiry group conducting the investigation, in CMA’s press release. “This deal would significantly reduce competition in two markets. It has already resulted in the removal of a potential challenger in the UK display ad market while also giving Meta the ability to further increase its substantial market power in social media.”

Meta provided Ars with the same statement given to other outlets. Giphy did not immediately respond to Ars’ request for comment. The CMA directed Ars to its press release.

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