The Competition Appeal Tribunal (CAT) has backed the majority of the UK competition watchdog’s probe into Meta’s merger with Giphy, causing a mighty blow for the Facebook owner’s team and raising serious questions about the future of UK M&A.
Last December, Meta launched an appeal against the Competition and Markets Authority’s (CMA) decision that Meta’s acquisition of Giphy would lead to a substantial lessening of competition.
Following an in-depth investigation, the CMA had found that Meta’s purchase of Giphy would reduce competition between social media platforms and had already removed Giphy as a potential challenger in the display advertising market in the UK. The decision required Meta to sell Giphy to a purchaser approved by the CMA.
In an approval handed down today, the tribunal upheld the CMA’s decision on five of the six challenged grounds, expressing “no hesitation” in concluding that the CMA’s finding that the merger between Meta and Giphy substantially reduced dynamic competition was lawful.
Commenting on the decision, CMA Chief Executive Andrea Coscelli said: “We welcome this resounding endorsement by the Competition Appeal Tribunal of the CMA’s approach to reviewing mergers that may harm innovation. Innovation is a vital part of the competitive process, particularly in digital markets”.
The tribunal only found in Meta’s favour in relation to the treatment of certain third-party confidential information. It considered that the CMA’s approach to disclosure in this case overly favoured confidentiality concerns of third parties.
The CAT also crucially upheld Meta’s procedural challenge, concluding that the CMA’s failure to disclose Snap’s acquisition of Gfycat significantly infringed Meta’s rights of defence.
The CAT found that the CMA’s selective disclosure of information to Meta was “difficult to defend” and “prima facie undermines the entirety of the Decision”.
The CAT will decide how to remedy the CMA’s breach in the coming weeks, which could mean quashing the entire decision and send the case back to the CMA for re-investigation.
It would be open to the CMA to reach the same findings and prohibit the deal, but only after proper consultation on materials previously withheld from Meta.
A Meta Spokesperson told City A.M: “We look forward to understanding how these serious process flaws will be addressed. We firmly believe our investment would enhance GIPHY’s product for the millions of people, businesses, and partners who use it.”