Facebook parent company Meta has been ordered by the United Kingdom’s competition watchdog to sell a GIF creation website, making it the first time the regulator has struck down a deal from a Silicon Valley company.
The Competition and Markets Authority announced Tuesday that it was finalizing a ruling to stop Meta’s attempt to acquire Giphy, a popular GIF-hosting platform. The regulator said that it had found that Meta’s control of Giphy could limit other social media platforms’ access to GIFs and that it removed Giphy as a competitor, thus discouraging innovation in the marketplace.
“We are disappointed by the CMA’s decision but accept today’s ruling as the final word on the matter,” a spokesperson for Meta told Sky News. “We will work closely with the CMA on divesting GIPHY. We are grateful to the GIPHY team during this uncertain time for their business and wish them every success.”
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The CMA published its original decision in Nov. 2021, arguing that Meta’s initial deal to acquire Giphy in 2020 would harm users and advertisers, which was subsequently appealed by Meta. Giphy tried to defend the acquisition, arguing in an August court filing that the company’s core product of animated GIFs “have fallen out of fashion as a content form, with younger users, in particular, describing gifs as ‘for boomers’ and ‘cringe'” and that no other company would consider acquiring Giphy. The appeals court ruled in favor of the CMA in July 2022, upholding five out of six of the challenged grounds.
Over the next three months, the CMA found that Meta’s acquisition of Giphy would increase the company’s market power by “denying or limiting other social media platforms’ access to Giphy GIFs, thereby pushing people to Meta-owned sites, which already make up 73% of user time spent on social media in the UK” and by “changing the terms of access — for example, it could require Giphy customers, such as TikTok, Twitter, and Snapchat, to provide more data from UK users to access Giphy GIFs.”
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The Meta-Giphy deal ended as the Big Tech company was struggling. While the company has promised to invest and build its vision of the “metaverse,” its products have struggled to attract enough users to justify the investment. It has also laid off hundreds of positions and rescinded internship offers to save money after its first profit decline last quarter.