Back in 2020, Facebook (now Meta) announced that it is acquiring Giphy for a sum of $400 million. The platform is popular for creating and hosting animated GIFs and short videos. Meta claimed that over half of Giphy's traffic already comes from platforms like Facebook, WhatsApp, and Instagram. However, this proposed deal has gone through quite a few hurdles in the past couple of years.
In August 2021, the UK Competition and Markets Authority (CMA) raised concerns about the acquisition, saying that the merger could negatively impact competition between social media platforms and also deprive the internet of another advertising player as Giphy was engaged in the ads space until Meta stopped these operations.
Meta protested against these conclusions in September and was fined £50.5 million by the CMA in October for not submitting required documentation in a timely manner and for attempting to change its Chief Compliance Officer (CCO) on two occasions without seeking consent from the CMA. Finally, in November, the CMA ordered Meta to sell off Giphy entirely to an approved buyer, a move which Meta appealed to the Competition Appeal Tribunal (CAT).
The CAT says that it has conducted a detailed investigation of the matter and has decided to uphold five out of the six challenged grounds in the decision. The only challenge that went in Meta's favor relates to the CMA not informing Meta about Snapchat's acquisition of Gfycat a year after being made aware of the ruling, something which could have strengthened Meta's defense. The remediation process will be finalized after joint consultation with Meta and the CMA.
Overall, the decision comes as a blow to Meta, as the CAT has emphasized that it too found that the acquisition would significantly harm the competition. Giphy being acquired after starting to invest in the ad space diminished competition in this particular area. As such, the CMA's ruling has been upheld.
The CMA's Chief Executive Andrea Coscelli welcomed the decision, saying that:
We welcome this resounding endorsement by the Competition Appeal Tribunal of the CMA's approach to reviewing mergers that may harm innovation. Innovation is a vital part of the competitive process, particularly in digital markets. We also welcome the Tribunal’s endorsement of the 'care and careful consideration' given to this issue by the independent Inquiry Group in this case.
This judgment helps reinforce our ability to protect competition and innovation in digital markets.
Meanwhile, in a statement to The Verge, Meta expressed disappointment at the decision, stating that:
Today’s ruling found that the CMA's approach to its investigation was 'difficult to defend' and 'undermines the entirety of the Decision'. We look forward to understanding how these serious process flaws will be addressed. We firmly believe our investment would enhance GIPHY’s product for the millions of people, businesses, and partners who use it.
It's clear from the statement that Meta is banking on the single overturned challenge to provide it some respite in a very uphill battle. However, it remains to be seen if that remediation is enough to provide it more ammunition to continue fighting regulatory authorities.