You probably don’t think of GIFs and think of showdowns with tech giants. Mostly, these short clips decorate people’s texts and social media profiles.
Now, they are at the forefront of regulators’ efforts to rein in big tech.
On Tuesday, the UK’s competition regulator – the Competition and Markets Authority (CMA) – told Facebook (now known as Meta) to unwind its acquisition of GIF library, Giphy.
By acquiring it, Meta had hoped to reinforce its huge global userbase and advertising heft with the growing popularity of GIFs.
The CMA provided two main reasons for blocking what might seem like a relatively harmless takeover. Firstly, they argued that Meta, as the owner of Giphy, would have the incentive to limit rivals’ access to GIFs, for example by asking them to hand over more data in exchange for GIFs. Secondly, the CMA pointed to Giphy’s recent launch of a paid advertising service – dismantled by Meta following the acquisition – which it claimed could have provided future competition to Meta’s own online advertising offer.
The decision is further evidence of a clear hardening in the regulator’s approach to tech mergers. From launching a detailed ongoing investigation into the planned merger of Nvidia and Arm to nearly derailing Amazon’s recent investment into Deliveroo, the CMA has become deeply sceptical of the merits of tech consolidation.
This reflects broader concerns about the market power of big tech, held not just by the CMA but competition regulators around the world. The CMA’s approach is only set to get tougher, with a new Digital Markets Unit (DMU), with new powers to enforce digital competition currently being established within the regulator
At the macro-level, the need for greater competition in digital markets looks convincing, but the consequences for individual firms and investors are more uncertain. Investors may be more willing to invest in startups if they believe they have a chance to challenge tech giants and become key players. But, they might also be reluctant to do so if acquisition by a large player – a common exit route – becomes impossible. For now it is too early to say which way the pendulum will swing.
A key question is Westminster’s position. Does the CMA’s aggressive approach threaten its plans to make the UK a global tech hub post-Brexit?
While the government has sought to put innovation at the heart of its policy agenda and make Britain a “science and technology” superpower, it nonetheless shares the CMA’s scepticism of big tech. From endorsing the CMA’s plans for the DMU to recently proposing to lower the burden of proof needed to block mergers, the government has embraced tougher enforcement while rejecting any perceived conflict between its pro-innovation agenda and desire to rein in the tech giants.
That might be Downing Street’s position, it remains to be seen if highly mobile investors will buy into it. With the UK’s economic attractiveness post-Brexit still under threat from fierce competition for tech investment, some may conclude the risk of winding up before the CMA is too great. If so, there could be fractures between the government and the competition authority.
If, as is likely the case, the CMA’s tough approach is mirrored by authorities in Europe, the US and Asia, then the relative impact to the UK could prove limited. In fact, a higher regulatory bar to clear for tech mergers would simply become the new normal that companies and investors have to contend with, wherever they happen to be based.