Meta is selling Giphy after UK regulator blocked a $315 million deal

Meta has been urged by UK competition regulators to sell GIF platform Giphy for a second time, ending the $315 million deal after a two-year antitrust battle.

The Competition and Markets Authority said on Tuesday that Meta’s purchase of New York-based Giphy – the largest provider of animated images known as social media gifs – “restricts choice for UK social media users and disrupts innovation.” in UK display advertising would decrease’.

The CMA first asked Meta to reverse the deal last November, but was forced by the Competition Appeal Tribunal to reconsider its conclusion in July after it upheld one of the social media company’s grounds for appeal.

The CMA’s final decision underscores pressure on Silicon Valley’s biggest tech companies from the UK regulator, which has sweeping powers to intervene in connections affecting UK consumers, even if the parties are based overseas. The Giphy deal marked the first time regulators moved to unwind a completed big tech deal.

Meta said Tuesday it was “disappointed with the CMA’s decision,” but accepted the ruling as “the final word on the matter.”

It added: “We will continue to explore opportunities – including through acquisitions – to bring innovation and choice to more people in the UK and around the world.”

The long fight, spanning more than two years, serves as a warning to big tech companies that regulators are increasingly wary of even small deals due to concerns about their market power.

The CMA reiterated its original conclusions, noting that Meta, which owns Facebook, WhatsApp and Instagram, could block access to gifs for its competitors such as TikTok or Twitter.

It also noted that Giphy may have been a key competitor to Facebook in advertising in the UK, although it does not currently offer such a service in the UK.

The regulator said: “The only way to avoid the significant competitive impact of the deal is to sell Giphy outright to an approved buyer.”

But finding a buyer could prove difficult for Meta. In a filing with the CMA in August, Giphy said few companies other than Meta were likely interested in buying it. It also warned that the use of GIFs had declined overall since the deal, saying they were “going out of fashion” with younger users, who called the animated images “twitch.”

The CMA said the merger would also eliminate a potential competitor in the £7billion display advertising market in the UK, where Facebook already has a 40% to 50% share.

Giphy has allowed companies in the US to promote their brands through GIFs in the past, and the CMA said it is considering offering the service in countries like the UK. But Giphy said it has no plans to enter the UK advertising market and is struggling financially.

Richard Pepper, a partner at law firm Macfarlanes, specializing in UK and European antitrust law, said the CMA’s finding in relation to display advertising was “perhaps the most contentious aspect”.

He said: “The decision reaffirms the CMA’s desire to pursue global M&A transactions it deems problematic and its willingness to make acquisitions based on dynamic damage theories based on facts not currently observable in the market, to question.”

He added: “This will only add to the concern that big tech is increasingly viewing the UK merger control regime.”