London (CNN Business)Meta has been ordered to unwind its recent acquisition of Giphy by regulators worried about the deal’s impact on competitors.
The UK Competition and Markets Authority said on Tuesday that Meta’s control of the popular search engine for GIFs — short, looping videos and animations — would reduce competition between social media platforms and had already removed one potential rival in the advertising market.
Facebook (FB), as Meta was then known, bought Giphy, reportedly for $400 million, in 2020. It was intending to integrate the service with Instagram, making it easier for people to find relevant GIFs for their stories and direct messages.
In its initial announcement of the deal, Facebook had vowed to grant third parties the same level of access to Giphy’s content as before. Less than a month after the acquisition was announced, however, the CMA said it was looking into it.
“After consulting with interested businesses and organizations — and assessing alternative solutions … 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 said in a statement.
The tech company said Tuesday it disagreed with the CMA and was considering “all options, including appeal.”
“Both consumers and Giphy are better off with the support of our infrastructure, talent, and resources,” a Meta spokesperson said. “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.”
In its initial findings published in August, the regulator said that Facebook’s control over Giphy could allow it to cut off other social media sites’ access to GIFs. Giphy’s services currently integrate with platforms such as Twitter (TWTR), Snapchat, Apple’s (AAPL) iMessage and Slack (WORK).
Although far from the largest deal Meta has ever done, the Giphy acquisition is the company’s first high-profile deal to be unwound by government officials.
The finding is a blow to Meta’s aspirations amid intense antitrust scrutiny by governments around the world, and a potential red flag for other Big Tech companies pursuing acquisitions in this regulatory climate.
The CMA said in August that Giphy had been planning to expand its growing advertising business to the United Kingdom before it was bought, a move that could have given UK brands a new way to promote themselves and create a direct challenger to Facebook in the advertising market.
“However, Facebook terminated Giphy’s paid advertising partnerships following the deal, meaning an important source of potential competition has been lost,” the CMA said in a blog post.
— Rob North, Brian Fung and Kaya Yurieff contributed to this article.
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