In a final report issued on October 18, 2022, the UK Competition and Markets Authority found that the acquisition by Meta Platforms, Inc. (formerly Facebook, Inc.) of GIPHY, Inc. may give rise to competition concerns for both the supply of advertising and of social medial services in the UK and beyond its borders.
GIPHY is a New York-based online database and search engine that allows users to search for and share GIFs (popular voiceless animations that use the Graphics Interchange Format). Meta is a multinational internet services company based in Menlo Park, California. Facebook, which became Meta in October 2021, is the largest social network in the world.
The acquisition was the subject of an inquiry by the CMA when first proposed, and on November 30, 2021, the CMA issued its original Phase 2 Final Report, in which it ordered that Meta sell GIPHY to resolve concerns that the acquisition would result in a substantial lessening of competition. Meta appealed the CMA’s decision to the Competition Appeal Tribunal, and on June 14, 2022, the Tribunal issued its judgment on the appeal, dismissing five of the six grounds of appeal, and upholding one of Meta’s grounds for appeal relating to procedural flaws. The Tribunal ordered that the Phase 2 Final Report be quashed and the case remitted for consideration afresh by the CMA.
Now, in its second Final Report (the Remittal Final Report), the CMA has again determined that Meta’s acquisition of GIPHY has resulted or may be expected to result in a substantial lessening of competition; the CMA again reached the conclusion that Meta must sell Giphy in its entirety in order to address the competition issues identified in the report. In its Remittal proceedings, the CMA remedied the procedural flaws, which revolved around third party confidential material that had been erroneously withheld from the parties.
The findings of the Remittal Final Report include:
- GIPHY has considerable market power in the supply of searchable GIF libraries;
- Meta has significant market power in the realm of social media, with Facebook platforms making up “the highest share of user time spent on social media in the UK”;
- Meta likewise has significant market power in relation to display advertising, with a market share of approximately 40 to 50 percent.
On the basis of these findings, the Report concludes that Meta’s acquisition of GIPHY has resulted or would result in detrimental effects, both horizontal and vertical — a substantial loss of dynamic competition in display advertising, and the potential foreclosure of social media rivals through limitation of their access to GIPHY (“input” foreclosure). Given the Report’s conclusions, the CMA decided that the only effective remedy to address the impermissible substantial lessening of competition would be the divestiture of GIPHY to a suitable purchaser.