The takeover of Giphy by Facebook is on hold for the time being. The British Competition and Markets Authority (CMA) issued the so-called “Initial Enforcement Order” (IEO) in June 2020, which prevents the two companies from merging during the investigation. Facebook has been inactive since then and has not answered the CMA’s questions, the judge in charge said.
The reason for the blockade for the merger of the two companies was, according to the CMA, that Facebook would negatively influence competition for web tracking through the integration of Giphy. No personnel or technology may be transferred to the other company while the IEO is running. In the event of non-compliance, the CMA can impose heavy fines.
“Facebook is to blame”
Judge Sir Geoffrey Vos said “the central problem in this case was caused entirely by Facebook itself” when he rejected an attempt to overturn the CMA’s order from last year. The Facebook lawyers asked why the CMA would not accept spin-offs during the IEO without considering the global legal framework.
Facebook appealed against the CMA’s order to the Court of Appeal that the IEO was “inappropriate and impractical”. The court of appeal justified the approach of the CMA that a company could swap parts or processes of its own business for those from the acquisitions at short notice. As a result, it would be difficult to restore the original status quo from the individual business areas at a later point in time.
Judge Vos said that he believed Facebook’s arguments were based on a number of misunderstandings. Facebook did not deal properly with the CMA, then did nothing and refused to answer the CMA’s questions The Register. It was Facebook’s mistake to believe that the CMA was not empowered to issue such orders that would affect the buyer’s business, the judge said. The Giphy merger will remain on hold until the CMA has finalized its forecasts.
The CMA can investigate a merger of companies as soon as the acquired company has annual sales in the UK of at least £ 70 million or the combined companies have a combined share of at least 25 percent of the “corresponding” market.
Access to additional data for Zuckerberg
Facebook bought Giphy for $ 400 million in May 2020. Before that, the companies led by Mark Zuckerberg were already using Giphy’s APIs for the Facebook app, Facebook Messenger, Instagram and WhatsApp. However, the interface should continue to be available for all providers, which means that Zuckerberg could get access to further data from other providers.
Giphy is a provider of “Web Tracking Beacons” that are cleverly disguised as funny little animated images to spice up online chats and comment areas, it says on The Register further.