Judges called on the UK watchdog this morning to revisit its ruling that said Meta should sell Giphy because of competition concerns.
In a major blow to the Competition and Markets Authority (CMA), the Competition Appeal Tribunal (CAT) quashed its previous decision and told the watchdog to reconsider whether Facebook’s parent firm’s $315m takeover of the GIF maker would reduce competition.
Head of Regulatory Affairs at the Institute of Economic Affairs Victoria Hewson told City A.M. that the ruling was an “embarrassment” for the CMA, “who should use this opportunity to seriously reconsider their original determination”.
The CMA initially found that the purchase would reduce competition and argued that the combination of the two firms removed Giphy as a potential challenger in the UK display advertising market.
The regulator ordered Meta to divest in Giphy last December, requiring Meta to sell the company to a purchaser approved by the CMA: something the Silicon Valley titan aggressively pushed back on.
Meta, which also owns Instagram and WhatsApp, argued that Giphy’s ad platform never had significant market potential and was therefore not restricting the market in an unfair way. Meta lawyers previously pointed to rival Snap’s attempt to buy Giphy for a significantly lower price of $142m as an example of its limited influence on competition.
A CMA spokesperson told City A.M. that it would commence the review shortly and provide a re-investigation within three months.
The spokesperson added: “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”.
The decision raises broader questions for M&A in UK moving forward.
As Hewson told City A.M. the judgment comes as CMA are seeking more powers to intervene in digital markets. “This case demonstrates unfair treatment and a damning lack of transparency. The government should have this in mind as it considers the accountability and performance of the CMA, and whether they should be given even more powers”, she said.