The CMA's intervention in the Meta Giphy acquisition could have long-term implications for the precedent of regulatory oversight in the digital economy. With the proliferation of tech giants and the growing dominance of a few major players, regulators around the world are facing pressure to ensure that competition is not stifled and that consumers have access to a wide range of choices. The outcome of the CMA's investigation into the Meta Giphy acquisition could set a paradigm for future deals in the tech sector, and it already spells more scrutiny for Meta. In the first few days of 2023, fines totaling more than half of the regional total from last year, and additional penalties may be on the way. Meta has already received On May 15th, 2020, when it became that Meta wished to acquire Giphy in an alleged $400 million transaction, the tech industry was abuzz with speculations about how Meta's purchase of Giphy might change the scene, and the Uk government was paying careful attention. known Giphy, the company in question, was by Jace Cooke and Alex Chung in February 2013. The firm was first launched as a straightforward GIF search engine. Later in its first year, the website offered a feature that permitted sharing via Facebook; shortly after winning the Top 100 Website of 2013 by Twitter was added as a second integration. This was the company's first significant product expansion. founded PC Magazine, With the addition of these features, Giphy will be able to reach both social media and website users, giving it access to a much bigger user base than it did previously, and ultimately laying the groundwork for its exponential development. According to the most recent statistics, Giphy with the support of investors such as DFJ Growth, Lightspeed, Betaworks, GV, Lerer Hippeau, and others had raised $150.9 million over five rounds. Crunchbase It is now clear that Meta was following closely, waiting for the right moment to hit the merger button. Why did Meta Decide to Buy Giphy? When Meta announced that it had paid a stunning $400 million for Giphy, the true reasons weren't immediately apparent. However, the firm claims that it was done solely to .” “make it easier for people to find the perfect GIFs and stickers The company has used GIPHY's API for years in applications like Instagram, Facebook app, Messenger, and WhatsApp. However, Meta no longer wants to be just a user; they want to be the platform's owner. Though Meta claims it will fund further technological advancement for Giphy and establish new connections with both content creators and endpoint developers, stating that it only has good intentions, the UK government, meanwhile, held a different opinion and continued opposing the merger because it did not believe it to be a good deal. “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.” Meta’s run-ins with regulators The blockage of the Meta Giphy acquisition is not the first conflict UK regulators or any other regulatory body have had with Meta nor is it the only instance of regulatory bodies getting involved in Meta's M&A deals. In 2014, the the purchase, which would make the social network one of the dominant players in the mobile messaging market, was viewed as a test case for how EU competition rules should be applied to the social media industries. Even though the deal was later approved, on May 18, 2017, the €110 million for producing false or misleading material during the Commission's 2014 investigation of Facebook's acquisition of WhatsApp under the EU Merger Regulation. EU investigated the Facebook-WhatsApp acquisition, European Commission fined Facebook Also, back in 2012, just before Facebook had its IPO, into Facebook's purchase of the photo-sharing application Instagram. The investigation involved the FTC interviewing Facebook's rivals and assessing the overall effects of the acquisition. Although the purchase was thought to put Facebook on a speedier path to mobile supremacy the the FTC opened an investigation FTC would ultimately approve it. On 2 August 2021, the potential acquisition of Kustomer. Not just the European Commission, but even the . According to the commission, the planned deal would lessen competition in the market for CRM (customer relationship management) software. The regardless. But, why all the investigations? European Commission launched a thorough inquiry into Facebook's CMA deal was later cleared “It is important to closely review potentially problematic acquisitions by companies that are already dominant in certain markets. This applies in particular to the digital sector, where Facebook enjoys a leading position in both online display advertising and in over-the-top messaging channels, such as WhatsApp, Messenger, or Instagram. Our investigation aims to ensure that the transaction will not harm businesses or consumers and that any data that Facebook gets access to does not distort competition.” - Margrethe Vestager, European Commissioner for Competition Impact of the UK regulatory action Meta, like other tech companies, has had a complex relationship with regulatory bodies. The company has faced regulatory scrutiny and criticism for a variety of issues, including its handling of user data and the spread of misinformation on its platform. Regulators from all across the world are beginning to step up their pressure on Meta to address these and other problems. For instance, for breaking data privacy regulations. In the United States, the company has faced investigations by the Federal Trade Commission (FTC) and other regulatory agencies just like the one it is facing with the CMA. Facebook was recently fined 265 million euros in Ireland The bottom line is that Meta has agreed to sell Giphy and is now facing more surveillance than ever. " I don't agree that the UK should be allowed to block the sale of a company. However, I do understand the point that Giphy is very popular in the UK and it would take them out of the UK social media and advertising markets. But I still think that should be Meta's decision not a decision for the UK government to make. If Meta wanted to buy and do nothing with it that should be their own decision. that's my opinion at least." - Jeff Krauss, Co-Founder, FanRoom Live Aside from the fact that this case specifically highlights the significant influence that national regulators can have on mergers and acquisitions (M&A), even when the involved companies are headquartered in other countries, history is being made. Note that Meta was forced to sell off Giphy by regulators in the United Kingdom, not the United States, though both Meta and Giphy are US-based companies. Withal, due to the global reach of the internet Meta and Giphy remain subject to U.K. law, which is why Meta is caving in and selling Giphy as requested. More importantly, since the global antitrust authorities started to pay attention to its economic supremacy, despite the fact that Meta has a track record of consistently battling with regulatory organizations. this is still the first time regulators have successfully split up a piece of the media giant Never before has a major tech company been told to unwind a prior acquisition rather than pay a penalty or make guarantees about how the combined companies will function. It’s definitely a huge blow to Meta and a big win for regulatory bodies. Giphy is a minor acquisition compared to some of Meta’s other well-known mergers. The company has invested far more money in past transactions. Like the virtual reality system from Oculus, the messaging platform Redkix, Instagram, and WhatsApp, the majority of Meta’s acquisitions have been user-focused. With the exception of businesses-focused projects like CRM tool Kustomer, which was purchased for $1 billion a year ago. “The "right now" conversation is that Meta recognizes its core product platform, Facebook, has aged. To stay relevant they need to continue to acquire fresh companies, products, and developer talent from more nimble startups. That's in no way a slight on Meta. Digital products age quickly and companies must rapidly adapt. At Decasonic, we refer to this as "Rapidapt", or “rapid adapt.” These days we talk in videos, emojis, and GIFs. Thus, if Meta doesn't upgrade their text-based experiences with startups like Giphy to adapt, its relevance will be challenged.” - Paul Hsu, Founder, and CEO of Decasonic But Giphy is just a GIF company, isn’t it? Still, regulatory bodies consider the merger to be significant. “Strategic acquisitions to reinforce the dominance of any platform through the acquisition of smaller, disruptive and innovative rivals should be a red flag for competition enforcers,” - Diana Moss, president of, the American Antitrust Institute Cost implications for Meta While it is difficult to accurately predict the price someone would pay for Giphy, one thing is for certain: the sale of Giphy will have some financial implications. In the fullness of time, the CMA's ruling is expected to result in Meta selling Giphy for a significant loss because . Additionally, the valuation of enterprises is falling as governments abandon their 0% interest rate policies. the U.S. Federal Reserve is actively raising interest rates Back in 2020, when Meta acquired Giphy the times were a bit different. As the old saying goes, "A dollar today is worth more than a dollar tomorrow." Even if Meta were to sell Giphy for the same amount it acquired, it’s still a loss due to inflation and the decrease in the value of the currency. Furthermore, Meta after purchasing Giphy shut down the company's advertising company and now the CMA order to sell Giphy also comes with the mandate to upgrade Giphy so that it can deliver GIF-based advertisements. Meta is also expected to deposit a minimum of $75 million in cash with Giphy. Undoubtedly, all these increase the financial impact the sale is going to have on Meta. “Meta's failing acquisition of Giphy is another blow to the tech conglomerate. It is now a target for politicians and a poster child for what's wrong with big tech. The CMA has put the company on the defensive again in relation to its push to support Marketplace, and, separately, its acquisition of Within hasn't gone as planned, either. If you consider these trials and tribulations in conjunction with Meta's ill-conceived dalliance in the metaverse, it is hard to find the sunshine for investors, particularly in the short term.” - Richard Gardner, CEO, Modulus It is probable that Meta will announce a loss after going through the process of selling. What next? As we’ve seen the relationship between Facebook and regulatory bodies has been dynamic, with both parties working to address concerns and establish rules and guidelines for the company's operations. It is likely that this relationship will continue to evolve as new issues arise and as regulators seek to address the challenges posed by the rapid development of technology. The Meta-Giphy case may indicate that a new set of principles for international antitrust law is taking shape. Apart from the potential minor yet significant loss that Meta might experience. Efforts to bust major tech giants might also pick up steam. “The impact of the UK regulatory intervention on Meta's attempted Giphy acquisition will, besides affecting the two businesses directly, have a potentially beneficial indirect effect on the tech industry in general. Primarily, it will reverse Meta's acquisition of Giphy and all the related agreements, and then restore both companies to pre-negotiation states. But indirectly, we might see a greater regulatory involvement in tech overall, which could lead to a more diverse and less monopolized online environment. We all stand to benefit from greater access to tools and features that were meant to be open to all, and not just up for grabs by megacorporations.” - Goran Luledzija, CEO, Localizely It is not surprising that Meta is now facing a growing trend where its mergers and acquisitions are being blocked by regulatory bodies. The to stop the company from buying Within Unlimited, a virtual reality technology business, on the grounds that the transaction might give Meta more leverage to build a "virtual reality empire." FTC recently filed a lawsuit “Instead of competing on the merits, Meta is trying to buy its way to the top” - John Newman, FTC Bureau of Competition Deputy Director. Additionally, the to get Meta to sell off WhatsApp and Instagram with allegations that Facebook engaged in anti-competitive business practices when it acquired both platforms. Federal Trade Commission is seeking “The impact of the decision by the Competitions and Mergers Authority will alert other big tech companies to the increased regulation level now being witnessed in the tech space. More tech mergers will be scrutinized, and with it, fewer companies will be willing to merge with so-called competitors to strengthen their own positions. With the reduced frequency of mergers, we can expect smaller tech companies to focus more on their growth since this channel of buyouts that previously seemed lucrative has become less desirable due to regulation. It will help the tech industry grow and make the competition landscape fairer. For users, the good news is that now they have a watchdog that will always seek to question what is the fine print of any big tech mergers ensuring that cartels are not formed against them.” - Alvin Wei, CMO and Head of Strategy at SEOAnt
