UK's CMA ordered to review Meta's forced Giphy sale

The antitrust authority must reconsider its order for Meta to sell popular gif platform Giphy.

As reported by Bloomberg, the UK's Competition Appeal Tribunal (CAT) found issues with the Competition and Markets Authority's (CMA) investigation into the Meta-Giphy deal. As a result, the court has sent the case back to the CMA so it can reassess whether or not the deal really would stifle competition in the market for display advertising and social media services.

This decision comes a month after the same tribunal issued a verdict that generally supported the CMA, in an appeal brought by Meta against the regulator's order to unwind the deal and sell Giphy.

According to The Verge, the tribunal ruled in favour of the watchdog on five of CMA's six claims against the firm.

In the one finding that went in Meta's favour, the tribunal said the CMA had failed to adequately inform the firm about Snapchat's purchase of Gfycat, which undermined its defence.

The CMA must now allow Meta to comment on an unredacted version of its report, in addition to reconsidering its decision.

"We have agreed to reconsider our decision in light of this finding," a spokesperson for the CMA told Bloomberg, adding that the agency aims to finish the process in three months.

Meta monopoly

The CMA became interested in Meta's purchase of Giphy shortly after the tech giant announced the deal in May 2020.

Meta (then Facebook) said it intended to integrate Giphy with its photo-sharing app, Instagram. The firm noted that nearly half of Giphy's traffic comes from various Facebook apps, including Instagram and WhatsApp, and insisted the acquisition would not impact Giphy's existing deals with other partners ('existing' is doing a lot of heavy lifting there - Ed.).

The CMA started its probe about a month after the announcement was made.

By August 2021, the CMA concluded that Meta's ownership of Giphy might be detrimental to users of other social media platforms and advertisers in the UK.

In November, the regulator issued a formal order instructing Meta to terminate the transaction and sell Giphy. It said the acquisition was likely to limit competition between social media platforms, and that Facebook could use the acquisition to increase its already significant market power by limiting or denying other platforms access to Giphy GIFs.

It added that the acquisition had already removed Giphy as a potential contender in the display advertising market.

'Facebook terminated Giphy's advertising services at the time of the merger [in 2020], removing an important source of potential competition,' the CMA said.

'The CMA considers this particularly concerning given that Facebook controls nearly half of the £7 billion display advertising market in the UK.'

It was the first time that a global regulator had sought to force a Big Tech firm to undo a completed deal, signalling a harsh regulatory strategy to dealing with the market clout of Silicon Valley giants.

'[The] ruling found that the CMA's approach to its investigation was 'difficult to defend' and 'undermines the entirety of the Decision,'' Meta said after CAT's initial ruling in June.

'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.'

In a prior argument, Meta claimed that the CMA was operating outside its authority by acting in this manner, since Giphy does not have any business operations in the UK (a technicality, but the sort that can drag cases on in courts for years).