Facebook and Instagram parent company Meta says it will accept a ruling by the UK competition watchdog to divest itself of social media GIF library Giphy.
A spokesperson for Meta, Matthew Pollard, told The Verge: “We are disappointed by the CMA’s decision but accept today’s ruling as the final word on the matter. We will work closely with the CMA on divesting Giphy.” When asked if the divestment would apply to all of Giphy’s international operations, Pollard said: “Yes, this applies globally.”
Meta was originally ordered to sell Giphy last year but appealed the ruling. Today, the UK’s Competition and Markets Authority (CMA) announced that Meta had failed on five of the six objections raised in its appeal. The CMA said that the acquisition should be reversed on the grounds that it “could allow Meta to limit other social media platforms’ access to GIFs, making those sites less attractive to users and less competitive.”
In the past, the CMA’s divestment orders have led to companies selling off only part of global operations, but Meta has confirmed it will sell off the US-based Giphy in its entirety. Generally, the CMA oversees such sales, judging the suitability of prospective buyers.
The CMA said that Giphy had been developing its own advertising services before it was bought by Meta
The CMA’s judgement was supported by a number of findings. An independent panel noted that Meta’s purchase of Giphy would allow it to increase its market power in multiple ways, including blocking off rival social media sites’ access to its library of GIFs, or forcing them to give over valuable user data in exchange for access. The panel also noted that prior to its acquisition, Giphy had been developing its own advertising services, which were instead folded into Meta’s offerings. The CMA said this was a competition problem given that Meta already controls roughly half of the UK’s £7 billion ($8 billion) display advertising market.
“This deal would significantly reduce competition in two markets,” Stuart McIntosh, chair of the CMA’s independent investigatory panel, said in a press statement. “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. The only way this can be addressed is by the sale of Giphy.”