Britain’s antitrust watchdog ordered Facebook parent Meta Platforms Inc. to sell Giphy, the first time a global regulator has forced a Big Tech firm to unwind a completed deal. This is the turnaround that was needed after being allowed for years to take over smaller rivals without much resistance.
The Competition and Markets Authority found that last year’s $315 million tie up with the GIF search engine will reduce competition between social media platforms, according to a statement Tuesday.
It’s the first time a Big Tech firm has been ordered by regulators in Europe and the U.S. to undo an acquisition rather than pay a hefty fine. Meta is now free to either appeal or sell.
Last year’s $315 million Giphy deal raised concern from U.K. regulators. Initial delays in the antitrust probe were caused by Facebook officials ordering Giphy to stop plans for its integration. The move sparked an extensive court battle.
Meta has now two options: appeal or divest
The company will be able to appeal the decision to the U.K.’s Competition and Appeals Tribunal where it would be heard as a judicial review, a court process that looks at how the CMA came to its decision. If Meta accepts the CMA’s ruling it will have to find a suitable buyer that will be vetted by the regulator.
“We disagree with this decision,” a Meta spokesperson said. “We are reviewing the decision and considering all options, including appeal.”
It is possible to close a deal with no approval. This can pose a risky strategy. Illumina Inc. may be subject to a $400 million fine by the EU if it closes a deal that was not approved. Google shut down its Fitbit purchase earlier this year without obtaining permission from the U.S. and Australia. Australia is investigating the deal.
According to the watchdog, the agreement had removed Giphy as a threat in the market for display advertising and Meta should sell Giphy completely to an approved buyer.
“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,” Stuart McIntosh, chair of the investigation, said.
Each side has fought the merger review process. Meta was penalized by the CMA with a fine of 50.5million pounds ($68,000,000). Meta failed to inform regulators regarding Giphy’s attempts to keep Giphy apart before it received U.K. merge approval. Meta appealed. Meta has accused CMA of being too disproportionate, and for failing to provide alternatives to divestment.
The U.S. tech industry giants face more challenges from European merger watchdogs as they assess their market power. Silicon Valley’s ability to buy up rivals was the subject of a lot of criticism. Facebook’s game-changing takeover of Instagram is often cited as a deal that was waved through by regulators without proper scrutiny.
Global regulators are not as concerned about the deal. Margrethe Vestager’s European Commission didn’t review the case, while Austria’s competition agency is still reviewing it.
—With assistance from David McLaughlin.