The social media juggernaut acquired the gif-sharing search engine in mid-2020 for $315 million. The goal was to integrate Giphy’s vast database of short video animations in loops with its equally ubiquitous social media platform Instagram.
Gif is an acronym for Graphics Interchange Format, an image format introduced in the 1980s to show static and moving images. GIFs are now an integral part of many posts and comments on social media.
However, the CMA has deemed the deal unfair to competing social media platforms.
In May 2020, when Facebook announced the purchase of Giphy, it stated that 50% of traffic to the Gif search engine’s traffic already came from Facebook platforms, while the remaining 50% is controlled by Instagram.
Stuart McIntosh, chairperson of the independent inquiry into the purchase, said that without action, Facebook would “allow Facebook to increase its significant market power in social media even further, through controlling competitors’ access to Giphy Gifs. “
The move by the CMA is seen as groundbreaking as it is the first time the CMA has blocked a major digital tech deal and sets the direction for the UK regulator’s oversight of similar deals in the future.
Meta expressed strong opposition to the decision in a recent statement.
“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. By seeking to undo the acquisition “in circumstances where Giphy does not even carry on business in the UK, not only is the CMA engaging in extraterritorial overreach but the CMA is sending a chilling message to start-up entrepreneurs, ‘Do not build new companies because you will not be able to sell them,’” Meta said.