Facebook is facing yet another legal struggle in the UK , with the Competition and Markets Authority (CMA) declaring that Facebook to sell Giphy, which it purchased in May 2020, because the transaction has the potential to decrease competition between social media platforms and in the display advertising market.
According to the CMA:
“The independent CMA panel reviewing the merger has concluded that Facebook would be able to increase its already significant market power in relation to other social media platforms by denying or limiting other platforms’ access to Giphy GIFs, driving more traffic to Facebook-owned sites, or changing the terms of access by, for example, requiring TikTok, Twitter and Snapchat to provide more user data in order to access Giphy GIFs.”
The CMA has recognized increased data access as a source of concern, and the examination also discovered that Giphy's own ad capabilities, which it had been working on, had the ability to compete with Facebook's own display ad services. Shortly after the acquisition, Facebook ceased Giphy's ad activities.
The CMA has determined that its competition concerns "can only be addressed by Facebook selling Giphy in its whole to an authorised buyer" in light of these factors.
Facebook – now Meta – will certainly challenge the decision, as it has previously stated in its response to the CMA's ruling.
“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.”
This signifies that Meta is unlikely to sell Giphy very soon, as the company still has the option to alter its decision. But, if upheld, the decision might signal a fundamental shift in how regulators view such deals, which have allowed tech behemoths to dominate their individual industries through tactical acquisitions aimed to stifle competitors and expand their market share.
Similar objections have been raised about Meta's acquisitions of WhatsApp and Instagram, both of which dramatically enhanced its market position and suffocated competition.
Meta has established a habit of purchasing competitor apps, first employing a data tracking technology to spot increasing apps among young users in order to direct its acquisition strategy and retain its market-leading position. Onavo, the invasive application that obtained information from mobile devices and reported back, was shut down in 2019 after multiple investigations raised doubts about the legality of tracking adolescent user behavior, in particular, via the invasive tool.
According to Onavo, Meta attempted to buy Snapchat in 2013, when the company was emerging, and when you consider the history of Meta's previous purchasing strategy, it appears pretty evident that Meta has pursued to acquire competitors and reduce market competition in order to boost its own position through overwhelming scale and resource power, which is at the heart of this latest case and others.
In this sense, the purchase of Giphy is on the lower end of the scale, but it might still be a symbolic and significant move in the digital industry, signaling more action and enforcement in the future.
But it is still difficult to predict exactly what impact each case will have in each area in this regard.
For instance, the Australian government presented new legislation earlier this week that would effectively oblige social media companies to identify trolls in certain circumstances in response to court requests. Legal experts have voiced numerous reservations about the method and its likely success, and it's difficult to predict whether it will have any impact on how social media businesses manage online abuse and solve legal concerns in general.
Under certain aspects, it appears that these types of initiatives have more clout in the United States, where the big social platforms are situated, while there appears to be no means to permit region-specific exemptions to fulfill local criteria in terms of acquisition.
This could indicate that Meta is finally compelled to sell Giphy as a result of this discovery. Meanwhile, Meta will pursue every possible avenue of appeal, which means the matter will most certainly drag on for a long period. However, it could result in a dramatic shift in the broader regulatory approach, which could affect the way giant internet platforms function - and hence encourage further innovation in the field.