The Competition and Markets Authority (CMA) has ordered Meta, the parent company of Facebook, to sell Giphy.

Giphy is an established online library of short video GIFs, offering the largest such catalogue on the internet. It also provides tools for users to create their own videos.

Meta bought bought Giphy back in May 2020, when it was still Facebook, for a reported $400 million after an initial offer in 2015 was refused. The aim was for Facebook to combine Giphy’s GIF library with its own social media apps such as Instagram.

However, the move caught the attention of the CMA back in summer this year. It argued that, with Facebook controlling the main supplier of GIFs, it gained power over other social media platforms and could restrict their use.

While the vast majority of Giphy’s traffic comes from Meta-owned platforms – about 50% from Facebook and 50% from Instagram – rivals such as Twitter and Snapchat also use it.

Since GIFs are shared across all platforms, having the power to decide where they can be used could prove a determining factor in customer choice, thus limiting competition.

The CMA ruling warned that Meta would gain market power 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”.

It would also be able to change “the terms of access by, for example, requiring TikTok, Twitter and Snapchat to provide more user data in order to access Giphy GIFs”.

Furthermore, Meta removed Giphy’s paid advertising partnerships feature, removing a competitor with its own advertising channels.

“The CMA considers this particularly concerning given that Facebook controls nearly half of the £7 billion display advertising market in the UK,” the ruling noted.

“After consulting with interested businesses and organisations – and assessing alternative solutions put forward by Facebook – the CMA has concluded that its competition concerns can only be addressed by Facebook selling Giphy in its entirety to an approved buyer,” a CMA statement read.

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Chair of the independent inquiry group carrying out the phase 2 investigation Stuart McIntosh added: “The tie-up between Facebook and Giphy has already removed a potential challenger in the display advertising market.

“Without action, it will also allow Facebook to increase its significant market power in social media even further, through controlling competitors’ access to Giphy GIFs.

“By requiring Facebook to sell Giphy, we are protecting millions of social media users and promoting competition and innovation in digital advertising.”

Facebook was also hit this year with a £50 million fine by the CMA for breaching an order imposed on it during the Giphy investigation. The penalty was applied because Facebook failed to provide regular updates showing it was complying with an initial enforcement order (IEO) requiring Facebook and Giphy to act as if they were separate companies.

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