Meta fails to overturn Giphy sale order by UK competition regulator

Meta has largely failed in an appeal against the UK competition regulator’s ruling that it must sell online image platform Giphy, in a blow to the social media giant’s hopes to add services that would benefit its billions of users.

The Competition Appeal Tribunal on Tuesday unanimously dismissed all but one of Meta’s grounds of appeal, concluding that the Competition and Markets Authority had acted rationally when it last year came to the decision that it should sell Giphy — the biggest provider of animated images known as gifs to social networks.

But the tribunal said the CMA may have to look again at its decision as a result of Meta’s one successful challenge — handing a potential lifeline to Facebook’s parent company.

Meta has been locked in dispute with the UK competition regulator since it was told to unwind its $315mn acquisition of New York-based Giphy last year — marking the first time the regulator had moved to dismantle a completed big tech deal.

The CMA concluded the deal would lead to a substantial lessening of competition and remove Giphy as a potential challenger in the display advertising market in the UK.

Although the CAT dismissed five of Meta’s six grounds of appeal on Tuesday, it ruled that the regulator had withheld information from Meta that could have helped its case. The CMA did not tell Meta that its rival Snap had acquired Gfycat until August last year.

As a result, the tribunal found the CMA had failed to properly consult during its probe and had also wrongly redacted material from its final decision.

The tribunal said Meta’s narrow success “undermines the entirety of the [CMA] decision”, meaning it would need to hear again from both parties about what should happen as a result and whether the regulator should look again at its ruling.

Meta faced a high bar to appeal against the CMA’s decision at the CAT, which does not revisit the substance of the case but looks at whether the regulator acted irrationally or illegally when coming to its decision.

The tribunal had “no hesitation” in concluding that the CMA’s finding that the merger between Meta and Giphy substantially reduced dynamic competition was lawful.

On Tuesday Meta said the ruling found that the “CMA’s approach to its investigation was ‘difficult to defend’ and ‘undermines the entirety of the decision’.”

It added: “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.”

CMA chief executive Andrea Coscelli said: “We welcome this resounding endorsement by the Competition Appeal Tribunal of the CMA’s approach to reviewing mergers that may harm innovation.”

The regulator began investigating Giphy in June 2020, kicking off a disagreement over whether or not Meta should retain control of the image library.

In its final report last year, the CMA said Meta could cut off its rivals’ access to gifs through the deal and demand platforms like Snapchat hand over more of their data in order to access them.

Meta claimed the CMA was wrong to claim that Giphy might have become a competitor in UK display advertising — a market the company claimed it had no intention of entering.

Giphy had in the past allowed companies in the US to promote their brands through gifs, something the CMA said the company could expand internationally.

The CMA argued that Giphy had created a new form of advertising using gifs in messaging, called paid alignment, which meant it was an important innovative company that should remain in the market.