In a significant push against big tech’s ability to maintain market dominance through sheer buying power, the UK’s competition watchdog has ordered Facebook (now Meta) to reverse its acquisition of animated GIF platform, Giphy — confirming the Financial Times‘ earlier reporting.
The Competition and Markets Authority (CMA) said its phase 2 investigation cemented earlier competition concerns about the impact of Meta owning and operating Giphy.
In a statement, Stuart McIntosh, chair of the independent inquiry group heading the CMA probe, said: “The tie-up between Facebook and Giphy has already removed a potential challenger in the display advertising market. 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,” he added.
This story is developing… refresh for updates…
The watchdog’s intervention follows an extended investigation of the acquisition that Facebook announced (and completed) in May 2020, with the CMA taking an initial look in summer 2020 — and dialling up its scrutiny over the following months.
It also, in June 2020, ordered a halt to further integration of Giphy by Facebook while the oversight continued.
In another first last month, the regulator fined Facebook almost $70 million for deliberately withholding information related to ongoing oversight of the acquisition — billing the infringement a “major” breach.
The CMA’s preliminary report on the acquisition, this August, concluded that Facebook’s takeover of Giphy raised a number of competition concerns — including that it would harm competition between social media platforms, given the lack of choice in the supply of animated GIFs.
The regulator’s concern was not only that Facebook might simply deny rivals access to Giphy content for their users to reshare but that the data-mining giant might change the terms of access — and could, for example, require rivals like TikTok, Twitter and Snapchat to provide it with more user data in order to access Giphy GIFs.
The CMA appears to have held to its concern on the risk of competitive harm through data extraction from other services, as well as from other more obvious risks — such as Facebook shutting off rivals’ access to the platform — hence rejecting all the tech giant’s proposed alternative ‘remedies’ to selling the unit as insufficient.
“After consulting with interested businesses and organisations — and assessing alternative solutions (known as ‘remedies’) put forward by Facebook — the CMA has concluded that its competition concerns can only be addressed by Facebook selling Giphy in its entirety to an approved buyer,” the CMA writes in a press release.
In the summer the watchdog had also said it was concerned about the impact on digital ‘display’ advertising — as Giphy had, pre-merger, been offering paid advertising services in the US (and considering expanding to other countries including the UK) with the potential to compete with Facebook’s ad services. An ambition that terminated with Facebook’s takeover.
“The CMA found that Giphy’s advertising services had the potential to compete with Facebook’s own display advertising services. They would have also encouraged greater innovation from others in the market, including social media sites and advertisers. Facebook terminated Giphy’s advertising services at the time of the merger, removing an important source of potential competition. The CMA considers this particularly concerning given that Facebook controls nearly half of the £7 billion display advertising market in the UK,” the regulator writes now.
A summary of the CMA’s final report can be found here.
Meta/Facebook has been contacted for its response to the CMA’s order to undo the Giphy acquisition.
The company responded aggressively to the CMA’s provisional findings this summer — denouncing the analysis and questioning the UK regulator’s jurisdiction over its business.
However concern over so-called ‘killer acquisitions’ — aka the ability of tech giants’ to flex their financial muscle to protect market power by buying budding competition to defuse the risk posed by startups and new services (sometimes literally by closing them down post-purchase) — has been a major topic of concern among industry watchers for years.
The critique centers on how competition regulators have failed to evolve theories of harm to keep pace with digital market dynamics. Failing, for example, to consider how data itself can be used as a tool against competition. Dominant platforms can also easily leverage their market power in one channel to rapidly scale into a new segment, via tactics like self-preferencing. While ‘free’ at the point of use services may still entail significant harms for consumers — such as abuse of their privacy.
In recent years, legislators and regulators have started to respond to such concerns — including by updating rules, such as in Germany which passed an update to its regime to cover digital platforms at the start of this year. (The country now has a number of open procedures against tech giants (including Facebook) to confirm its ability to impose preemptive measures.)
In the US, the Biden administration’s elevation of Lina Khan to chair the FTC, earlier this year, marks key moment of change on US soil — signalling lawmakers’ support for a reformist approach toward regulating tech.
It follows Khan’s landmark paper (on Amazon) which examined how the government’s outdated ways of identifying monopolies have failed to keep up with modern business realities. What was initially dismissed by some — as ‘hipster antitrust’ — is now setting the establishment regulatory agenda. Although Khan still faces huge opposition on home soil from the tech lobby working through channels like the US Chamber of Commerce.
Over in the EU, the Europe Commission has also been working to address the lag between tech and antitrust.
Since December it’s had a draft proposal on the table for a set of ex ante rules to apply to intermediating platform giants (aka, those classified as ‘gatekeepers’ under the Digital Markets Act). Although whether the DMA goes far enough to actually help reboot competition remains to be seen.
The UK, now outside the bloc, has its own update to domestic competition law incoming, also aimed at tackling platform power — with a new regime of bespoke rules for platforms deemed to have ‘strategic market status’.
All this comes too late to undo plenty of baked in tech consolidation, however. But not too late to undo Facebook-Giphy.
Outdated approaches to regulation of digital markets has allowed thousands of tech acquisitions to be waived through over the past decades — including Facebook’s purchase of photo-sharing site Instagram, messaging platform WhatsApp and VR headset maker Oculus, to name three strategic takeovers which span the core social networking arena that Facebook/Meta owns and wants to keep owning for decades to come (in an even more immersive/invasive form; aka “the metaverse”).
Earlier this year, the Commission failed to block Google’s acquisition of health wearable Fitbit — despite a huge outcry from civil society warning out letting the adtech giant gobble up such sensitive data, for example.
More recently the CMA also cleared Facebook’s acquisition of CRM maker Kustomer — again using a fairly narrow assessment of potential competition risks — and entirely ignoring privacy advocates who were raising concerns over what the adtech giant would do with Kustomer users’ data.
The CMA’s decision now to order Facebook to reverse its acquisition of Giphy is a significant development — albeit, it’s still just one decision that hasn’t gone big tech’s way.
Discussing the move in response to questions from TechCrunch, professor Tommaso Valletti, a former chief...
The Competition and Markets Authority (CMA) said its phase 2 investigation cemented earlier competition concerns about the impact of Meta owning and operating Giphy.
In a statement, Stuart McIntosh, chair of the independent inquiry group heading the CMA probe, said: “The tie-up between Facebook and Giphy has already removed a potential challenger in the display advertising market. 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,” he added.
This story is developing… refresh for updates…
The watchdog’s intervention follows an extended investigation of the acquisition that Facebook announced (and completed) in May 2020, with the CMA taking an initial look in summer 2020 — and dialling up its scrutiny over the following months.
It also, in June 2020, ordered a halt to further integration of Giphy by Facebook while the oversight continued.
In another first last month, the regulator fined Facebook almost $70 million for deliberately withholding information related to ongoing oversight of the acquisition — billing the infringement a “major” breach.
The CMA’s preliminary report on the acquisition, this August, concluded that Facebook’s takeover of Giphy raised a number of competition concerns — including that it would harm competition between social media platforms, given the lack of choice in the supply of animated GIFs.
The regulator’s concern was not only that Facebook might simply deny rivals access to Giphy content for their users to reshare but that the data-mining giant might change the terms of access — and could, for example, require rivals like TikTok, Twitter and Snapchat to provide it with more user data in order to access Giphy GIFs.
The CMA appears to have held to its concern on the risk of competitive harm through data extraction from other services, as well as from other more obvious risks — such as Facebook shutting off rivals’ access to the platform — hence rejecting all the tech giant’s proposed alternative ‘remedies’ to selling the unit as insufficient.
“After consulting with interested businesses and organisations — and assessing alternative solutions (known as ‘remedies’) put forward by Facebook — the CMA has concluded that its competition concerns can only be addressed by Facebook selling Giphy in its entirety to an approved buyer,” the CMA writes in a press release.
In the summer the watchdog had also said it was concerned about the impact on digital ‘display’ advertising — as Giphy had, pre-merger, been offering paid advertising services in the US (and considering expanding to other countries including the UK) with the potential to compete with Facebook’s ad services. An ambition that terminated with Facebook’s takeover.
“The CMA found that Giphy’s advertising services had the potential to compete with Facebook’s own display advertising services. They would have also encouraged greater innovation from others in the market, including social media sites and advertisers. Facebook terminated Giphy’s advertising services at the time of the merger, removing an important source of potential competition. The CMA considers this particularly concerning given that Facebook controls nearly half of the £7 billion display advertising market in the UK,” the regulator writes now.
A summary of the CMA’s final report can be found here.
Meta/Facebook has been contacted for its response to the CMA’s order to undo the Giphy acquisition.
The company responded aggressively to the CMA’s provisional findings this summer — denouncing the analysis and questioning the UK regulator’s jurisdiction over its business.
However concern over so-called ‘killer acquisitions’ — aka the ability of tech giants’ to flex their financial muscle to protect market power by buying budding competition to defuse the risk posed by startups and new services (sometimes literally by closing them down post-purchase) — has been a major topic of concern among industry watchers for years.
The critique centers on how competition regulators have failed to evolve theories of harm to keep pace with digital market dynamics. Failing, for example, to consider how data itself can be used as a tool against competition. Dominant platforms can also easily leverage their market power in one channel to rapidly scale into a new segment, via tactics like self-preferencing. While ‘free’ at the point of use services may still entail significant harms for consumers — such as abuse of their privacy.
In recent years, legislators and regulators have started to respond to such concerns — including by updating rules, such as in Germany which passed an update to its regime to cover digital platforms at the start of this year. (The country now has a number of open procedures against tech giants (including Facebook) to confirm its ability to impose preemptive measures.)
In the US, the Biden administration’s elevation of Lina Khan to chair the FTC, earlier this year, marks key moment of change on US soil — signalling lawmakers’ support for a reformist approach toward regulating tech.
It follows Khan’s landmark paper (on Amazon) which examined how the government’s outdated ways of identifying monopolies have failed to keep up with modern business realities. What was initially dismissed by some — as ‘hipster antitrust’ — is now setting the establishment regulatory agenda. Although Khan still faces huge opposition on home soil from the tech lobby working through channels like the US Chamber of Commerce.
Over in the EU, the Europe Commission has also been working to address the lag between tech and antitrust.
Since December it’s had a draft proposal on the table for a set of ex ante rules to apply to intermediating platform giants (aka, those classified as ‘gatekeepers’ under the Digital Markets Act). Although whether the DMA goes far enough to actually help reboot competition remains to be seen.
The UK, now outside the bloc, has its own update to domestic competition law incoming, also aimed at tackling platform power — with a new regime of bespoke rules for platforms deemed to have ‘strategic market status’.
All this comes too late to undo plenty of baked in tech consolidation, however. But not too late to undo Facebook-Giphy.
Outdated approaches to regulation of digital markets has allowed thousands of tech acquisitions to be waived through over the past decades — including Facebook’s purchase of photo-sharing site Instagram, messaging platform WhatsApp and VR headset maker Oculus, to name three strategic takeovers which span the core social networking arena that Facebook/Meta owns and wants to keep owning for decades to come (in an even more immersive/invasive form; aka “the metaverse”).
Earlier this year, the Commission failed to block Google’s acquisition of health wearable Fitbit — despite a huge outcry from civil society warning out letting the adtech giant gobble up such sensitive data, for example.
More recently the CMA also cleared Facebook’s acquisition of CRM maker Kustomer — again using a fairly narrow assessment of potential competition risks — and entirely ignoring privacy advocates who were raising concerns over what the adtech giant would do with Kustomer users’ data.
The CMA’s decision now to order Facebook to reverse its acquisition of Giphy is a significant development — albeit, it’s still just one decision that hasn’t gone big tech’s way.
Discussing the move in response to questions from TechCrunch, professor Tommaso Valletti, a former chief...