Meta forced to sell Giphy: two steps forward or one leap back?

By Joshua Ng

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Source: https://www.techtarget.com/searchunifiedcommunications/answer/Whats-the-difference-between-social-media-and-social-networking

The UK’s Competition and Markets Authority (CMA) has recently announced that it will be requiring Meta to unwind its acquisition of Giphy, a Graphics Interchange Format (GIF) hosting platform and search engine. The CMA ruled that the acquisition would “reduce competition between social media platforms and that the deal has already removed Giphy as a potential challenger in the display advertising market.”


Two steps forward…

The landmark ruling demonstrates the CMA’s increased willingness to regulate Big Tech. After all, this is the “first time the CMA has ever blocked a major digital tech deal”.[2]


A bolder, more assertive CMA has two benefits. Firstly, on the economic front, we are more likely to see healthy competition in tech-related markets, such as display advertising. Secondly, on the socio-political front, by increasing scrutiny of tech mergers, the CMA is challenging Meta’s problematic dominance of social media. This is a welcome step — the fact that Meta-owned sites monopolize 73% of user time spent on social media in the UK[3] is problematic in light of events such as the Cambridge Analytica scandal.


...But one leap back?

However, the decision may be problematic from a legal perspective as it undermines legal certainty. The essence of legal certainty is that the law (and thus regulations) should be predictable. The CMA’s decision is made on the grounds of Giphy and Facebook being potential — and not current — competitors. Future competition is difficult to predict. By ruling on the abovementioned grounds, the CMA has made determining how regulations would govern a merger more unpredictable, potentially discouraging future mergers of this nature.


Striking a balance

Ultimately, the CMA appears to have struck an acceptable balance. It has demonstrated its willingness to foster much-needed competition in tech-related oligopolies. It has challenged Big Tech’s problematic dominance of social media and related services. While the ruling raises a certainty issue, the issue might be avoided entirely if companies seek clearance from the CMA before proceeding with a merger.



[1] Competition and Markets Authority, ‘CMA directs Facebook to sell Giphy’, https://www.gov.uk/government/news/cma-directs-facebook-to-sell-giphy, accessed 4 Dec 2021

[2] BBC, ‘UK competition watchdog orders Meta to sell Giphy’ https://www.bbc.co.uk/news/technology-59460644, accessed 4 Dec 2021

[3] Competition and Markets Authority