Meta/Giphy: deal animates UK regulator into misguided action

UK regulators hoping to square up to Big Tech have picked a strange target for hardline intervention. The $315m purchase of US-based animated image provider Giphy by Meta (as Facebook’s owner now calls itself) is unlikely to be transformative. The market for gifs is no money-spinner.

Gifs, shorthand for graphical interchange format, are looped animations used for jokey online communication. Giphy is estimated to be the largest platform, with more searches than rival Tenor. The latter was purchased by Google in 2018 without regulatory pushback.

Regulatory resistance has become more pronounced in the intervening years. Since the start of 2019, 69 per cent of deals in the UK that reach the Competition and Markets Authority’s detailed Phase 2 investigation have resulted in unwinding and abandonment, according to UK law firm Linklaters.

The antitrust watchdog has significant latitude for intervention. It can look at any deal in which the UK turnover of the acquired company is more than £70m or the two companies account for 25 per cent of a particular market. The CMA says Facebook controls up to 50 per cent of the UK display advertising market so it fits the bill.

Yet the CMA’s three arguments for unwinding the deal are unconvincing. It says Meta’s purchase could limit gifs on other social media platforms, discouraging users. Second, it claims Meta might demand data to access gifs from rivals. Third, it believes Giphy’s interest in extending advertising partnerships to the UK means Facebook has choked a potential rival.

But gifs are not so compelling that users will delete accounts without them. Nor has Facebook demanded data from rivals. Giphy’s reported financial troubles suggest it was not poised to expand into a new digital advertising market either.

The CMA is acting tough over Giphy in the hope of atoning for perceived failures in the past. Facebook’s $1bn purchase of photo sharing app Instagram in 2012 helped it to morph into a digital advertising duopoly with 2.91bn monthly active users. Gifs will not have the same effect. The CMA is engaged in the time-hallowed regulatory practice of closing the stable door after the horse has bolted.