Meta must sell Giphy, says UK regulator

Meta, the company until very, very recently known as Facebook, has been ordered to sell Giphy, the GIF-making and sharing platform, by the UK's competition regulator.

The Competition and Markets Authority, a non-ministerial government department promoting competition for consumers, published a report on Tuesday, concluding that the tech giant's acquisition of Giphy "would reduce competition between social media platforms and that the deal has already removed Giphy as a potential challenger" in the market.

Over a year ago, Giphy was acquired by Facebook reportedly for a cool $400 million.

The CMA said that Facebook/Meta's market power is disproportionate, increasing said power by denying other platform's access to Giphy GIFs, and also requiring other major social media platforms — such as TikTok and Snapchat — to provide more user data to access Giphy's library.

The regulators also said that Giphy's brand services, "which it was considering expanding to countries outside the U.S., including the UK," could have competed with Meta for display ad space. For example, Giphy's commercial tools allowed brands like Dunkin' Donuts and Pepsi to advertise with creative GIFs, but due to the merger, this competition for ad space would no longer be possible.

"The CMA considers this particularly concerning given that Facebook controls nearly half of the £7 billion display advertising market in the UK," reads the press release.

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"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," said Stuart McIntosh, chair of the independent inquiry group carrying out the investigation, in a press statement. He also said that by ordering the sale of Giphy, CMA is "protecting millions of social media users and promoting competition and innovation in digital advertising."

Meta has been investigated by the CMA since Facebook bought Giphy in 2020. In May 2021, Facebook responded in accordance with the inquiry, saying "Giphy is not and would not have become a social media or messaging competitor to Facebook," without the sale, claiming Giphy had no social network, messaging product, and "no meaningful audience of its own and was reliant on Facebook for a significant proportion of its user traffic."

In October, the CMA fined Facebook £50.5 million ($66.8 million) for "breaching an initial enforcement order," after it bought Giphy — investigations are standard practice for the department following a sale like this. The fine was in part due to Facebook "consciously refusing to report all the required information," according to the CMA. "Given the multiple warnings it gave Facebook, the CMA considers that Facebook’s failure to comply was deliberate."

In a statement to the Verge, Meta said that the company is assessing its options, including an appeal. "Together, Meta and Giphy would enhance Giphy's product for the millions of people, businesses, developers and API partners in the UK and around the world who use Giphy every day," Meta’s EU director of policy communications Robin Koch said.

When approached for comment, a Meta spokesperson told Mashable, "We disagree with this decision. We are reviewing the decision and considering all options, including appeal. Both consumers and GIPHY are better off with the support of our infrastructure, talent, and resources. Together, Meta and GIPHY would enhance GIPHY's product for the millions of people, businesses, developers and API partners in the UK and around the world who use GIPHY every day, providing more choices for everyone."

UPDATE: Dec. 1, 2021, 11:30 a.m. UTC Added statement from a Meta spokesperson.