Meta to sell Giphy after UK regulator blocks $315mn deal

Meta has been ordered to sell gif platform Giphy for the second time by the UK competition regulator, bringing an end to the $315mn deal following a two-year antitrust battle.

The Competition and Markets Authority said on Tuesday that Meta’s purchase of New York-based Giphy — the biggest provider of animated images known as gifs to social networks — would “limit choice for UK social media users and reduce innovation in UK display advertising”.

The CMA first told Meta to unwind the deal last November, but was forced by the Competition Appeal Tribunal in July to reconsider its conclusion after it upheld one of the social media company’s grounds of appeal.

The CMA’s final decision underlines the pressure on Silicon Valley’s biggest technology companies from the UK regulator, which has broad powers to intervene in tie-ups touching British consumers even when the parties are based overseas. The Giphy deal marked the first time the regulator had moved to dismantle a completed Big Tech deal.

Meta on Tuesday said it was “disappointed by the CMA’s decision” but accepted the ruling as “the final word on the matter”.

It added: “We will continue to evaluate opportunities — including through acquisition — to bring innovation and choice to more people in the UK and around the world.”

The long battle, which has spanned more than two years, serves as a warning to big tech companies that regulators are increasingly wary of even small deals because of concerns over their market power.

The CMA reiterated its original conclusions, noting that Meta, which owns Facebook, WhatsApp and Instagram, could cut off access to gifs for its rivals such as TikTok or Twitter.

It also found that Giphy could have been an important competitor to Facebook in UK advertising, even though it did not at present offer such a service in Britain.

The regulator said: “The only way to avoid the significant impact the deal would have on competition is for Giphy to be sold off in its entirety to an approved buyer.”

But finding a buyer could prove difficult for Meta. In a filing to the CMA in August, Giphy said few companies other than Meta were likely to be interested in buying it. It also warned there had been an overall decline in gif use since the deal, saying they had “fallen out of fashion” with younger users who described the animated images as “cringe”.

The CMA said the tie-up would also remove a potential competitor in the £7bn display advertising market in the UK, where Facebook already has a 40 to 50 per cent share.

Giphy had in the past allowed companies in the US to promote their brands through gifs, and the CMA said it was considering bringing that service to countries including the UK. But Giphy said it had no plans to enter the UK ad market and had been struggling financially.

Richard Pepper, a partner at law firm Macfarlanes specialising in UK and European antitrust, said the CMA’s finding in respect of display advertising was “perhaps the most controversial aspect”.

He said: “The decision reaffirms the CMA’s desire to pursue global M&A deals that it finds problematic, and its willingness to challenge acquisitions on the basis of dynamic theories of harm based on facts that are not currently observable in the market.”

He added: “This will only add to the concern with which Big Tech increasingly view the UK merger control regime.”