Meta reluctantly agrees to sell Giphy after admitting defeat in the Battle of Britain

Considering that Meta bought WhatsApp and Instagram without issue, it might come as a surprise that Meta was prevented from buying Giphy. But that is the case because the UK Competition and Markets Authority (CMA) has ordered Meta to sell Giphy.

The decision comes two years after the merger came under increasingly intense scrutiny from UK regulators. Struggling every step of the way, Meta has since told Reuters that although it is “disappointed” with the decision, it “will accept today’s decision as the final word on the matter”.

Reasons Meta sold Giphy include CMA’s concerns that Meta and Giphy dominate the GIF market and that Meta could block competitors’ access to Giphy content. Meta could also possibly change its terms and charge competitors an exorbitant fee for access. This threatened to increase Facebook’s already dominant presence in the social media market, forcing users to choose the platform where they can access the best GIFs, which the CMA feared. The regulator noted that 73 percent of the time UK residents spend on social media is on Facebook.

Also in question was Giphy’s previous place in the display advertising market at the time of Meta’s (then Facebook’s) $400 million acquisition. The CMA seemed to suggest that the Meta’s acquisition may have been driven by the urge to shut down a burgeoning Giphy display business that may have several display options for UK businesses. (Meta told Ars that it believes there is no evidence to suggest this.) In a press release, the CMA said Meta already controls half of display advertising in the UK.

“Prior to the merger, Giphy was offering innovative advertising services in the US and was considering expanding to other countries, including the UK,” CMA said in a press release. This included trying to recruit big brands like Dunkin’ Donuts and Pepsi to buy promotional GIFs. Reviewing the evidence from Meta and Giphy, the CMA determined that “Giphy’s ad services have the potential to compete with those of Meta and will encourage more innovation from Meta and other market players.”

“The only way to get around this is by selling Giphy,” said Stuart McIntosh, head of the independent investigative group that led the investigation, in a CMA press release. “This deal will significantly reduce competition in the two markets. It has resulted in the elimination of a potential competitor in the UK display market while also giving Meta the ability to further increase its significant market power in social media.”

Meta gave Ars the same statement given to other outlets. Giphy did not immediately respond to Ars’ request for comment. CMA referred Ars to the press release.

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