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Facebook (FB) stock falls after UK’s CMA blocks Giphy deal

By Angelique Ruzicka

13:12, 30 November 2021

A fresh-faced Mark Zuckerberg, founder and CO of Facebook, attends a public event
Zuckerberg’s company has been blocked by the CMA – Photo: Shuttertock

Shares in Facebook (FB) – which recently rebranded as Meta Platforms Inc while retaining the same stock ticker – dipped slightly by 0.57% before US markets opened after a UK regulator blocked its attempts to buy animated graphics interchange format (GIF) platform Giphy.

The Competition and Markets Authority (CMA) ruled that Meta’s acquisition would result in substantial lessening of competition in social media and display advertising, and would also harm social media users as well as UK businesses.

It’s the first time the CMA has attempted to unwind a completed acquisition by a tech giant. Facebook completed the acquisition of Giphy in May 2020, although it has had to keep the businesses separate since June 2020.

Giphy – a leading provider of GIFs

Giphy is the leading provider of free GIFs and GIF stickers, and claims to have the world’s largest library of GIFs. A GIF is a digital file that displays a short, looping, soundless video, while a GIF sticker is an animated image. Giphy is headquartered in New York, US; just like Facebook, its products are offered free of charge to users.

The CMA initially made some provisional findings back in August where it found that the deal would hurt the display advertising market. The CMA pointed out that although the GIFs are free for application program interface (API) partners to use the merger may still result in a substantial lessoning of competition (SLC).

It claimed it has reached this conclusion following the consultation of a variety of sources, rigorous testing of its evidence and calculating the market shares of Facebook and Giphy. The gathering of evidence included persusing over 280,000 internal documents from the parties and consulting other market participants.

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Evidence findings

The CMA said it considered the relative strength of the parties in the core markets in which they operate – searchable GIF libraries, social media and display advertising – and looked at the horizontal and vertical effects of the merger.


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It pointed out that Tenor (owned by Google) was the only other close competitor to Giphy, but found that Giphy had several distinctive features that made it more attractive than the opposition, such as the quality of its content. When it came to the provision of social media, the CMA concluded that Facebook had significant market share.

The CMA said: “In particular, we considered the fact that the Facebook platforms make up by far the highest share of user time spent on social media in the UK (73% in 2020) and that other platforms tend to be accessed in addition to the Facebook platforms, rather than as an alternative to them.”

These findings are mirrored in the CMA’s Online Platforms and Digital Advertising Market Study, which it published in July 2020.

Divestiture the only solution?

The CMA acknowledged Facebook’s remedy suggestions, which included ‘open access’, white-label licensing and ‘commingling’, but concluded that the only effective solution was the divestiture of Giphy.

Facebook claimed the CMA’s provisional findings had “fundamental errors” and that the regulator had failed to provide alternative remedies for it to approve the deal.

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