Meta's Giphy loss sets new antitrust precedent
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Meta's agreement to sell Giphy under orders from U.K. regulators marks the first time the social networking giant has been forced to unwind an acquisition — and widens the horizon for global regulatory efforts to rein in Big Tech companies.
The big picture: GIFs, the animated images Giphy distributes, were never that consequential themselves and might even be falling out of fashion today. But Meta paid $400 million for the company more than two years ago, and reversing that transaction will set a new precedent that tech giants can be made a bit smaller.
Why it matters: One key argument lawyers for Big Tech firms make in defending their acquisitions from antitrust action is that unwinding such deals is impractical. Every merger is different, to be sure, but the Giphy case will give anti-monopoly crusaders one solid example to the contrary.
Driving the news: Competition regulators in the United Kingdom issued a final verdict in their case against Meta Tuesday, ordering the company to sell Giphy.
- The U.K.'s Competition and Markets Authority found that Meta's acquisition of Giphy "could allow Meta to limit other social media platforms’ access to GIFs," and that the deal "removed Giphy as a potential challenger in the U.K. display advertising market, preventing U.K. businesses from benefiting from innovation in this market."
- A source familiar with the situation told Axios there is a six-month deadline for Meta to sell Giphy, and the buyer must be approved by the CMA.
What they're saying: "We are disappointed by the CMA’s decision but accept today’s ruling as the final word on the matter," a Meta spokesperson told Axios.
The ruling won't deter Meta from trying to buy other companies, the company says: "We will continue to evaluate opportunities — including through acquisition — to bring innovation and choice to more people in the U.K. and around the world."
Between the lines: European regulators operate with wider powers and stronger rules than their U.S. counterparts, but the Giphy decision will still reverberate here, experts say.
- The U.K. ruling will remove "the psychological barrier to forcing a divestiture," Joel Mitnick, an antitrust attorney with Cadwalader, Wickersham & Taft and a former FTC trial lawyer, told Axios.
- "It may be less shocking, less of a stretch, for a federal district court judge considering what to do at the end of a trial to order divestiture, because it's now been done," he said.
- "It's a very interesting precedent that might usher in additional other precedents that are on the docket in a variety of different places, including the U.S.," Ari Lightman, a professor of digital media at Carnegie Mellon University, told Axios.
Yes, but: "I would caution taking too much from this order and extrapolating it to the U.S. agencies," said Mitnick. "The CMA enjoys certain procedural advantages."
Be smart: The Giphy ruling is the U.K. competition regulator's first major tech decision since Brexit.
- "Big Tech is already very aware of the CMA as being an antitrust agency that has become much more skeptical of arguments that mergers in the digital space are always pro-competitive, or even neutral," Peter Broadhurst, a London-based attorney at Crowell and Moring, told Axios. "[This] is just confirmation that the CMA is not materially softening its stance."
