Facebook's parent company ordered to sell Giphy 'in its entirety'

An antitrust watchdog has ordered Facebook's parent company, Meta, to sell Giphy less than two years after the purchase was announced.

The U.K. Competition and Markets Authority on Tuesday said Meta must sell the GIF search engine that it reportedly acquired for $400 million, CNN reports. Facebook announced it would buy Giphy in May 2020, saying at the time that "by bringing Instagram and Giphy together, we can make it easier for people to find the perfect GIFs and stickers in Stories and Direct."

But the Competition and Markets Authority said that this acquisition would "reduce competition between social media platforms" and could allow Facebook to "increase its already significant market power," such as by denying other platforms access to GIFs from Giphy.

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Additionally, the CMA said an investigation showed Giphy's "advertising services had the potential to compete with Facebook's own display advertising services," so the merger removed "an important source of potential competition" for Facebook. These concerns "can only be addressed" by Facebook selling Giphy "in its entirety," the watchdog concluded.

"The tie-up between Facebook and Giphy has already removed a potential challenger in the display advertising market," Stuart McIntosh, chair of the group that conducted the investigation, said. "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."

A spokesperson for Meta told CNN it's considering "all options, including appeal" in response to the CMA's decision. The spokesperson also argued that "both consumers and Giphy are better off with the support of our infrastructure, talent, and resources."