The CMA has ordered Meta to sell Giphy in a bid to protect its dominance in social media and display advertising. Meta’s dominance of these markets is significant. Giphy is the largest provider of free GIF stickers and gifs in the UK. Meta has no other suitable bidder, and the CMA has agreed to appoint a separate manager for the company.
Meta says it will appeal the decision to sell Giphy
Facebook parent company Meta is appealing the CMA’s decision to force it to sell Giphy, which is the world’s largest GIF sharing platform, to rival Snap. Meta argued that Snap was offering less than GIPHY and that the decision undermined the rationale for blocking the acquisition. The UK regulator said it would vigorously defend its decision, and it is considering appealing. Giphy was acquired by Meta in 2020 for approximately $400 million.
The CMA imposed a moratorium on the deal in June 2020, pending an investigation. The CMA announced its provisional findings in August 2021. The agency argued that the merger could harm competition. The regulator could force Facebook to sell Giphy in full. But the company says the decision is based on flawed evidence, and it plans to fight it vigorously. Meanwhile, Meta has to find a buyer.
CMA says it will appoint a separate manager for Giphy
Facebook-owned Meta is fighting an order to sell Giphy to rival Snap, which has offered to pay less than the price for the popular photo-sharing app. But the UK’s Competition and Markets Authority (CMA) has blocked the deal, saying it would remove a potential competitor in display advertising and a large paid alignment business. The CMA is considering the suit, and the company will likely make its case before the end of February.
The CMA issued an enforcement order in June 2020, which put the sale on hold until the merger was fully investigated. In August 2021, the CMA released provisional findings. They noted that the acquisition would reduce competition and could force Facebook to sell off Giphy in its entirety. The decision is a blow to entrepreneurs and new businesses and was seen as an extraterritorial overreach.
Meta could cut off the supply of gifs to rivals
The CMA is now considering the possibility that Meta could hurt rivals by cutting off their supply of gifs. The CMA has expressed concern that a takeover of a social network like Facebook could limit access to content by rivals. The social media giant could also harm competitors by denying them access to the content. It is unclear how the CMA will rule on the matter, but this decision has been welcomed by tech skeptics.
While the competition authority has never blocked a big tech acquisition before, the deal between Meta and Giphy is the first in its history. The merger is set to close in the first quarter of 2016. But, before that, the two companies had to settle lawsuits over the acquisition. Giphy paid a large dividend to its investors before the deal, which significantly reduced its value and lowered its federal threshold. The FTC has since retracted its guidance on dividends and has vowed to use a “holistic” review of mergers in the future.
No other company came forward to buy Giphy
Facebook’s acquisition of Giphy earlier this month makes perfect sense. Not only is Giphy popular, but it is not revenue-generating. Moreover, Facebook has already integrated Giphy into its family of apps and plans to do even more integration in the future. However, this acquisition also means that Giphy’s paid advertising partnership agreements with third-party developers will be canceled. That’s not entirely a bad thing, since Giphy’s API and the library will remain open to third-party developers.
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Giphy’s acquisition by Facebook is one of the largest consumer deals made by the company in recent years. Facebook has long been aggressively acquiring companies that compete with its own. Instagram was acquired by Facebook for $1 billion in 2012 and WhatsApp for $19 billion in 2014. While it may seem like a massive deal, Giphy has seen a massive drop in valuation in recent years. Last year, the company was valued at $600 million and had raised at least $72 million in venture capital. It was only in 2016 that other companies came forward with offers to buy Giphy.