Meta has been ordered to sell Giphy to “an approved buyer”, putting an end to a long-running battle between the tech giant and the UK’s competition watchdog since the $315m acquisition of Giphy in May 2020.
The Competition and Markets Authority (CMA) made its original ruling to Meta to sell the GIF platform in November last year. Meta then appealed the decision to the Competition and Appeal Tribunal (CAT), which in July 2022 upheld the CMA’s decision on five of the six challenges Meta put forward.
The CMA had concluded that Meta’s takeover of Giphy could mean other social media platforms could be limited in their access to GIFS, making them less attractive and less competitive. It also found the deal meant Giphy would be removed as a potential challenger in the UK, blocking UK businesses’ access to innovation in the market.
Following the Tribunal’s ruling, which included the statement that it had “no hesitation” in concluding the CMA’s decision was lawful, the competition watchdog went through with an expedited review and issued its final decision this week.
The CAT had only found in Meta’s favour on a procedural challenge, which was that the CMA overly favoured confidentiality concerns of third parties in relation to disclosing information, and that it had in fact “failed properly to consult and has wrongly excised portions from [its] decision”.
As a result an independent CMA panel analysed additional evidence from third parties alongside new submissions from Giphy and Meta.
The CMA concluded that the acquisition meant Meta would be able to increase its market power by denying or limiting other platforms’ access to GIFs, meaning people would be pushed to Meta-owned services. It also meant Meta could in theory change the terms of access - such as requiring Giphy customers like TikTok, Twitter or Snap to provide more data from users to gain access to GIFs.
Display ad market impact
The CMA also ruled that the takeover would negatively affect the display advertising market – as Giphy’s ad services did have potential to compete with Meta. But post-acquisition Meta pulled the plug on Giphy’s aad services, removing what the CMA believed to be a powerful tool for UK companies.
This was particularly concerning, said the CMA as it calculated that the move gave Meta control of almost half the UK’s £7bn display ad market.
Stuart McIntosh, Chair of the independent inquiry group carrying out the review, said: “[This deal] has already resulted in the removal of a potential challenger in the UK display ad market, while also giving Meta the ability to further increase its substantial market power in social media.
“The only way this can be addressed is by the sale of Giphy. This will promote innovation in digital advertising, and also ensure UK social media users continue to benefit from access to Giphy."
The future of GIFs?
Ed East, Group CEO and Founder of Billion Dollar Boy, commented that GIFs may still be commonplace, but that we may see their decline in the future.
He said: “Often they’re used across social platforms whose audience is ageing. By association, they are less popular with younger generations who are using other platforms. Instead, video-first platforms such as TikTok with advanced and user-friendly editing functionality are making it easier and easier for users to create other video content formats that allow you to quickly express emotion, replacing the creation of GIFs.”
But while the popularity of emojis have “further helped to cement the fate of GIFSs”, East asserted that they still have a place.
“It might be that GIFs aren’t trending anymore and are on the way out, but I think GIFs do still have a place. Brands will just need to be smarter with how they incorporate them and target GIF content based on audience age demographics.”