The Competition and Markets Authority (CMA) has given Facebook, recently rebranded to Meta, a mandate to sell Giphy following investigations carried out by the CMA.
Last year, Facebook acquired GIF company Giphy, after which the tech giant “terminated Giphy’s advertising services at the time of the merger, removing an important source of potential competition.”
According to the CMA in view of the merger, Facebook would be able to increase its already significant market power in relation to other social media platforms by:
- denying or limiting other platforms’ access to Giphy GIFs, driving more traffic to Facebook-owned sites – Facebook, WhatsApp and Instagram – which already account for 73% of user time spent on social media in the UK
- changing the terms of access by, for example, requiring TikTok, Twitter and Snapchat to provide more user data in order to access Giphy GIFs
Prior to the merger, Giphy had launched innovative advertising services which it was considering expanding to countries outside the US, including the UK.
Giphy’s services allowed companies – such as Dunkin’ Donuts and Pepsi – to promote their brands through visual images and GIFs. This was limited by the merger.
The result of CMA’s investigation also showed that Giphy’s advertising services had the potential to compete with Facebook’s own display advertising services. “They would have also encouraged greater innovation from others in the market, including social media sites and advertisers.”
The CMA considers this particularly concerning given that the tech giant controls nearly half of the £7 billion display advertising market in the UK.
Following consultations with interested businesses and organisations – and assessing alternative solutions (known as ‘remedies’) put forward by Facebook – the CMA concluded that its competition concerns can only be addressed by Facebook selling Giphy in its entirety to an approved buyer.
Stuart McIntosh, chair of the independent inquiry group carrying out the phase 2 investigation, said the tie-up between Facebook and Giphy has already removed a potential challenger in the display advertising market.
He pointed out that this will also allow Facebook to increase its significant market power in social media even further, through controlling competitors’ access to Giphy GIFs.
“By requiring Facebook to sell Giphy, we are protecting millions of social media users and promoting competition and innovation in digital advertising.”