Facebook parent Meta Platforms on Tuesday agreed to sell Giphy after Britain’s competition regulator ruled that the 2020 acquisition of the animated-images platform reduced innovation in the advertising market.
“Meta’s takeover of Giphy could allow Meta to limit other social media platforms’ access to GIFs, making those sites less attractive to users and less competitive,” the Competition and Markets Authority said in a statement Tuesday.
The watchdog group added that the $400 million deal “has removed Giphy as a potential challenger in the UK display advertising market, preventing UK businesses from benefiting from innovation in this market.”
Meta said it would accept the order. “We are disappointed by the CMA’s decision but accept today’s ruling as the final word on the matter,” a Meta spokesperson said in a statement. “We will work closely with the CMA on divesting Giphy.”
The regulator blocked the deal in November, arguing that the Instagram and WhatsApp owner would deny or limit competitor’s access to GIFs created on the Giphy platform.
“The deal has already removed Giphy as a potential challenger in the display advertising market,” it said in a statement when it demanded Meta sell the platform. Its probe into the deal found that Giphy had launched “innovative advertising services which it was considering expanding to countries outside the US, including the UK” before the deal, working with companies like Dunkin’ Donuts and Pepsi, to use visual images and GIFS in ads.
The CMA found that these advertising services “had the potential to compete with Facebook’s own display advertising services,” and “would have also encouraged greater innovation from others in the market, including social media sites and advertisers.” But Meta spiked Giphy’s ad services when it bought the company, “removing an important source of potential competition,” the agency said, estimating that Meta controls “nearly half” of the £7 billion ($7.9 billion) display advertising market in the UK.
Also among the concerns was that even if Meta didn’t deny access to the GIFs, it could change its terms of service and demand that competitors like TikTok, Twitter and Snapchat “provide more user data in order to access Giphy GIFs.”
Meta appealed the November order, but that appeal was largely turned away in June, with just one of its six arguments accepted. The regulator said it reviewed new evidence submitted by Meta and Giphy over the last three months before issuing its ruling.
“This deal would significantly reduce competition in two markets,” said Stuart McIntosh, chair of an independent inquiry group. “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.”