This concern, however, only formed half of the CMA’s argument. While cautioning about reduced competition between social media platforms, the regulator simultaneously warned about its impact on a market which doesn’t yet exist. The CMA said Giphy had the potential to rival Facebook in the UK advertising market if it had not been bought. “Before the merger, Giphy had launched innovative advertising services which it was considering expanding to countries outside the US, including the UK,” the watchdog said in a statement, citing GIFs that Pepsi and Dunkin’ Donuts had created to promote their brands.
“This is the interesting bit,” says Peter Broadhurst, a competition partner at law firm Crowell & Moring, who labels the CMA’s targeting of a deal involving two US companies as “expansionist.” “Giphy wasn’t generating any revenue in the UK,” he says. “But the CMA found evidence, not particularly strong evidence by the sound of it, that it might have tried to sell advertising in the UK at some point in the future, and they felt ‘that’s enough for us.’” The decision also shows that the UK regulator, emboldened by Brexit, is ready to assert itself on the global antitrust stage, says Pepper. “In the UK, we have an unusual regime that gives the CMA quite a broad set of powers to intervene in a lot of transactions, and it has been using those powers, following Brexit in particular, to respond to smaller deals.”
The decision isn’t a total surprise, either. The CMA has been carrying out an in-depth probe into the Giphy acquisition since April 2021. In September 2021, Facebook responded to the investigation’s provisional findings by questioning Britain’s jurisdiction over the deal in a document published by the UK government. “The facts, in the present case, are simple,” Facebook said. “Facebook and Giphy do not compete in the UK, and there is no overlap in relevant commercial activity giving rise to a competition concern.”
Meta is now facing a growing trend where mergers are being flagged by countries to which the deal has no significant connection, believes Tyler. She adds that the European Union and its member states are also beginning to look at deals taking place far beyond their borders, pointing to Austria’s referral of Meta’s acquisition of customer service platform Kustomer to the European Commission in March 2021. “The US is having a difficult time enforcing against mergers and possibly, as a result, a lot of other enforcers are looking at how they can keep market harm from occurring,” Tyler says.
For a regulator in one country to block a deal where the companies involved are rooted in another is unusual but not unprecedented. In 2001, the European Union blocked Boston-headquartered General Electric’s proposed acquisition of another US conglomerate, Honeywell. In 2018, a Chinese review scuppered plans of US semiconductor company Qualcomm to swallow Dutch rival NXP. In May 2021, airline software companies Sabre and Farelogix failed in their appeal against the CMA’s decision to block their merger, even though Farelogix had no UK customers or turnover.