Facebook is facing yet another regulatory battle, this time in the UK, with the Competition and Markets Authority (CMA) ruling that Facebook must sell GIPHY, which it acquired in May 2020, due to the acquisition’s potential to reduce competition between social media platforms, and in the display advertising market.  

As outlined by 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.”

Increased data access is one element of concern identified by the CMA, while additionally, the investigation also found that GIPHY’s own ad tools, which it had been developing, had the potential to compete with Facebook’s own display ad services. Facebook shut down GIPHY’s ad projects shortly after the acquisition.

With these elements in mind, the CMA has concluded that its competition concerns “can only be addressed by Facebook selling GIPHY in its entirety to an approved buyer”.

Facebook – now Meta – will likely appeal the verdict, a move which it has flagged already in its response to the CMA finding

“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.”

That likely means that Meta won’t be selling off GIPHY any time soon, as it still seems that it could reverse the decision. But if it stands, the ruling could mark a major shift in approach to regulatory approval of such acquisitions, which have enabled the tech giants to dominate their respective markets through tactical purchases designed to quell competitors and expand their reach.

Meta has faced similar questions over its acquisitions of both WhatsApp and Instagram, both of which also significantly improved its market position, and squeezed out competition.

Meta has made habit of buying up competing apps, originally using a data tracking program which helped it detect rising apps among young users in order to guide its buying strategy to maintain its market-leading position. That program, Onavo, was shut down in 2019 after various investigations raised questions around the legality of tracking young user behavior, in particular, via the invasive program, which accessed info from mobile devices and reported back.

Based on Onavo insight, Meta also sought to purchase Snapchat back in 2013, as Snap was on the rise, and when you look at the overall picture of its previous purchasing strategy, it seems fairly clear that Meta has indeed sought to buy up competitors, and reduce competition in the market, in order to maximize its own position through sheer scale and resource power, which is the core of this latest case, and various others.

In this respect, its acquisition of GIPHY is on the lower end of the scale, but even so, it may well be a symbolic and important stance in the tech space, flagging more action and enforcement around the same moving forward.

Though it is always hard to tell exactly what impact each case, in each region, will mean in this respect.

For example, earlier this week, the Australian Government introduced new legislation which would effectively force social media companies to identify trolls, on legal request, in certain cases. Legal experts have raised many questions about the approach, and its likely effectiveness, and it’s difficult to say whether it will actually have any impact on social media companies more broadly in regards to how they manage online abuse, and address legal concerns.

In some ways, it feels like these types of pushes have more sway when they’re enacted in the US, where the major social platforms are based, though in terms of acquisition, it also seems like there’s no way to facilitate region-specific exemptions to meet local requirements.

Which could mean that Meta is, in fact, eventually forced to sell off GIPHY as a result of this finding. Again, Meta will explore every avenue of appeal, which will likely see the case drag on for some time yet. But it could make a significant shift in broader regulatory approach, that might change the way that the big tech platforms operate – which could also fuel expanded innovation in the sector.

Source: Social Media Today

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