Facebook’s parent company Meta has been directed to sell GIF-sharing platform Giphy by a UK watchdog over competition fears.
The Competition and Markets Authority (CMA) said the decision was “protecting millions of social media users and promoting competition and innovation in digital advertising.”
The independent CMA panel reviewing the merger concluded that the deal had increased Meta’s already significant market power by denying or limiting other platforms’ access to Giphy GIFs, driving more traffic to Meta-owned apps, and changing the terms of access by requiring some rival platforms to provide more user data in order to access Giphy.
The competition watchdog said the deal also removed Giphy as a potential challenger in the display advertising market after its investigation found that before the merger, Giphy’s advertising services had the potential to compete with Facebook’s own ad business by allowing companies to promote their brands through images and GIFs.
The CMA said Facebook’s termination of Giphy’s advertising services at the time of the merger is something it considered “particularly concerning” given that Facebook controls nearly half of the £7 billion ($9.3 billion) display advertising market in the UK.
“The tie-up between Facebook and Giphy has already removed a potential challenger in the display advertising market,” said Stuart McIntosh, chairman of the independent inquiry group which carried out the investigation.
“Without action, it will also allow Facebook to increase its significant market power in social media even further, through controlling competitors’ access to Giphy GIFs.
“By requiring Facebook to sell Giphy, we are protecting millions of social media users and promoting competition and innovation in digital advertising.”
In response, a Meta spokesperson said: “We disagree with this decision.
“We are reviewing the decision and considering all options, including appeal. Both consumers and Giphy are better off with the support of our infrastructure, talent, and resources.
“Together, Meta and Giphy would enhance Giphy’s product for the millions of people, businesses, developers, and API partners in the UK and around the world who use Giphy every day, providing more choices for everyone.”
Last month, the CMA fined Facebook £50.5 million ($66.86 million) after it failed to provide enough important information to the competition regulator investigating the Giphy takeover.