Facebook parent Meta's been putting up a strong fight appealing the U.K. antitrust decision investigating and ultimately ordering Meta to sell Giphy, the GIF marketplace that it acquired back in May 2020 for around $315 million; and now it has gotten a small stay of execution: the U.K.'s Competition Appeal Tribunal has sent the case back to the antitrust regulator, the Competition Markets Authority, to be reassessed, after it found that the CMA didn't provide full, un-redacted disclosure to Meta representatives of documents related to its decision.
Notably, the appeals tribunal held up every other aspect of the CMA's ruling -- namely, that the CMA acted within its powers and did not make an unreasonable evaluation and subsequent remedy in this case, where it deemed that competition in social media would be harmfully reduced due to the acquisition.
But despite that, this is an incremental win for Meta's legal team.
The ruling effectively means that the CMA's decision that it published in November 2021, ordering Facebook (now rebranded as Meta) to sell Giphy, is on pause, with the order now "provisional", and again set to be reassessed after Meta's lawyers are giving more documentation pertaining to the case to resubmit their own case.
The tribunal made its decision back in June, but it was quietly made public today in a short note (per Bloomberg). You can read the full, 107-page citation here, or the one-page summary of the decision here.
The specific passage that relates to the case being sent back notes that the CMA "failed to properly consult and wrongly excised portions from [its] Decision," and it further noted that the CMA failed on this point because "the named individual members of the CMA group [in the Decision] are not expected to personally conduct a merger investigation and personally draft the CMA’s provisional findings and final decision."
“The recent judgment from the Competition Appeal Tribunal endorsed the CMA’s approach to reviewing mergers that may harm innovation," a CMA spokesperson said in a statement to TechCrunch. "The CMA won on 5 of 6 grounds, with Meta winning 1 in relation to our process of sharing confidential information. We have agreed to reconsider our decision in light of this finding. We will commence our review shortly and will seek to complete the remittal within three months of today’s order."
We have contacted Meta for a comment, too, and will update this post as we learn more, but in effect this means that Meta's legal team will now get access to the CMA's final, unredacted report to mount a new defense of the deal, and specific rebuttals to any points, based on that data.
The original acquisition of Giphy, if the CMA's order would have been upheld, would have required not only for Meta to find a buyer, but to pay a breakup fee to Giphy in the process. Ironically, the case has already seen information being withheld on the other side: Facebook paid a fine of $70 million for failing to provide data to the CMA in connection with the antitrust investigation (a fact that still is irrelevant in the tribunal ruling).
If you're wondering who else might be interested in acquiring the company if Meta cannot, or if Giphy would look to build its own independent business, it's interesting to see that in the meantime, Giphy's been making some very interesting deals with other social media companies such as TikTok and Reddit.
The original decision published by the CMA panel in November 2021, which has been reversed here, noted that "Facebook would be able to increase its already significant market power in relation to other social media platforms by denying or limiting other platforms’ access to Giphy GIFs, driving more traffic to Facebook-owned sites -- Facebook, WhatsApp and Instagram -- which already account for 73% of user time spent on social media in the UK, or changing the terms of access by, for example, requiring TikTok, Twitter and Snapchat to provide more user data in order to access Giphy GIFs."
It also highlighted that the deal would impact the display advertising market. "Before the merger, Giphy had launched innovative advertising services which it was considering expanding to countries outside the U.S., including the U.K. Giphy’s services allowed companies -- such as Dunkin’ Donuts and Pepsi -- to promote their brands through visual images and GIFs," the CMA noted.
"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. The CMA considers this particularly concerning given that Facebook controls nearly half of the £7 billion display advertising market in the UK."
If information is a powerful piece of currency in the courts, then Meta's made a key inroad to giving it another shot at keeping Giphy, and conversely the CMA has found that when competing against a tech giant's legal team, it's important to be unimpeachable in how it proceeds with all of its paperwork and other work.
But it is more than this. Some have seen this Giphy deal and how it's played out in the antitrust arena as a kind of make-up for what, in retrospect, looks like a failure to bring in more oversight, and potential competitive remedies, around much bigger deals that Facebook made years ago, its acquisitions first of Instagram and then WhatsApp.
In that regard, this case becomes a precedent of sorts for both sides. A win for Meta here provides a strong message for Meta with subsequent M&A and what it can hope to do. And a win for the CMA sets the pace for how it might respond to other deals of this size both for Meta and other big social media and consumer internet giants.