Meta, ordered by CMA to sell its $400M property, Giphy.

Highlight

  • The UK’s Competition and Markets Authority, in a court ruling, ordered Meta to sell Giphy in its entirety.
  • The regulatory body, CMA, deeply concerned about the lessenening of competition in display advertising
  • Meta controls half of the UK’s $7.9 billion display advertising market.
  • The CMA seeks more powers to further combat big tech companies for breaching competition laws.
  • Glossary [Click to jump to glossary]

Main gist

Meta, the parent company of Facebook, Instagram, WhatsApp, etc., on Tuesday submitted to the Competition and Markets Authority’s verdict which orders it to sell Giphy in its entirety to a suitable buyer.

The animated images platform previously acquired by Meta in 2020 with a sum of $400M be up for sale to interested and suitable buyers. Who would that be? We are yet to know.

However, we do know that the takeover of Giphy by Meta raised a disturbing concern for the regulators (CMA) over the lessening of competition in social media and display advertisements which it cited in the proceedings.

Acquiring competing brands has been a major competitive business model for the tech giants in our day, following the acquisition of Instagram and WhatsApp by Meta, and recently, Figma, by Adobe. Beyond the surface narrative you get, you should think about the actual aim of these brand takeovers.

According to CNBC, a spokesperson for Meta stated that the company was disappointed by the ruling but accepts it as final word on the Giphy matter. And has agreed to work closely with CMA in divesting Giphy.

Also, recall that the CMA initially instructed Meta to divest Giphy after finding out the negative impact of the deal on social media users and UK advertisers. But Meta disagreed with the decision and rather appealed the case.

However, in June, the company’s appeal was ruled against by an appeal court, and the case kicked back to the CMA’s jurisdiction. After a thorough review of the deal, the regulatory body concluded that the deal will further increase Meta’s market power which is already halving UK’s $7.9 billion display advertising market equity.

But not just that, it’ll adversely affect competition in the display advertising market. A notable example is the Giphy brand itself, which before the acquisition move by Meta, had launched its own advertising service but this got shut down by Meta immediately after the merger.

In light of this whole troubled waters, the CMA further seeks to be empowered the more so that it can clamp down on big tech companies that fail to comply with competition laws in the UK.

Sidetrack: this year alone, Meta has been in and out of courts regarding advertising, competition malpractice, etc. From South Africa prosecuting it to the Competition Tribunal for alleged aniti-trust breach, in which Meta tried to block the government startup GovChat and LetsTalk, to the Nigerian ads regulator, ARCON, suing it over illegal display ads practices, etc.

In all, the tech giant doesn’t seem perturbed at all. Instead, this is what the spokeperson had to say “We will continue to evaluate opportunities – including through acquisition – to bring innovation and choice to more people in the UK and around the world.”

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Glossary

  • Giphy: top source for the best & newest GIFs & Animated Stickers online
  • Lessening: to reduce
  • Proceedings: action taken in a court to settle a dispute
  • Divest: to give up one’s business/investment interest
  • Perturbed: feeling anxiety or concern; unsettled
  • Sidetrack: going off the main subject.

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