By Joe Hoppe

 

The U.K.'s competition regulator said Tuesday that it has directed Meta Platforms Inc., formerly Facebook, to sell social-media animated images company Giphy, with the social media company considering its options.

Facebook bought Giphy in May 2020, paying $315 million, according to documents published as part of the Competition and Markets Authority's review.

The British regulator said that the social media platform's acquisition of Giphy would reduce competition between social-media platforms and that the deal has already removed Giphy as a potential challenger in the display-advertising market, in-line with its provisional findings published in August.

Meta said it in a statement that disagrees with the decision and that both consumers and Giphy would be better off with its support. It said it is reviewing the CMA's directive, along with all of its options, including appealing.

"Together, Meta and Giphy would enhance Giphy's product for the millions of people, businesses, developers and API partners in the U.K. and around the world who use Giphy every day, providing more choices for everyone," a Meta spokesperson said.

After consulting with interested businesses and organizations, along with assessing alternative solutions, the CMA concluded that its competition concerns can only be addressed by the company selling Giphy in its entirety to another buyer.

"By requiring Facebook to sell Giphy, we are protecting millions of social-media users and promoting competition and innovation in digital advertising," said Stuart McIntosh, chairman of the independent inquiry group carrying out the investigation.

Giphy allows users to search for, create and share animated images known as GIFs, which stands for graphics interchange format. When Facebook bought Giphy last year, the company said it planned to integrate it into Instagram and other apps.

The CMA said that the merger would have increased Facebook's already significant market power, driving more traffic to Facebook sites--which already account for 73% of user time spent on social media in the U.K.

given the majority of Facebook's major competitors--including Twitter Inc., TikTok and Snapchat--use Giphy GIFs, those sites could be affected if the social-media giant opted to deny its peers access to the images, or if it changed usage terms such as requiring more user data, the CMA said.

The regulator also said that before Giphy was acquired by Facebook, it had launched its own innovative paid advertising business in the U.S., which had the potential to compete with Facebook's advertising services, and had been considering expanding to other countries including the U.K.

The CMA began probing the deal in June 2020 and launched an initial investigation in January. It fined Facebook 50.5 million pounds ($67.2 million) in October, saying it had breached the initial enforcement order in relation to the merger.

 

Write to Joe Hoppe at joseph.hoppe@wsj.com

 

(END) Dow Jones Newswires

November 30, 2021 05:55 ET (10:55 GMT)

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