It has traditionally been difficult for the CMA to assess and understand the entry and dynamic competition in technology markets. Looking at potential evolution of markets and dynamic competition if often simply hard to do through lack of knowledge and evidence. In the Meta /Giphy case the CMA has, assessed the supply side and "Timely Likely and Sufficient" entry from alternatives and different technologies.
From a quick review Gifs may not typically be thought of as offering much competitive constraint to digital advertising as currently supplied by Meta and others. But this understates the important role of Giphy in competing on advertising. If Gifs are sufficiently important, then they can be used to compete in ad-funded revenue streams.
The CMA conduced an in depth and detailed review and found that Meta has a very strong market position and the transaction would enhance that position. Indeed, it found that Meta sites already make up 73% of user time spent on social media in the UK, that GIFs continue to be an important driver of user engagement on social media platforms, with people making billions of searches globally each month for Giphy GIFs and that the merger would take out a potential competitor and hence negatively impact the display advertising market. This was because, before the merger, Giphy was offering innovative advertising services in the US and was considering expanding advertising services to other countries, including the UK.
The CMA found that Giphy's advertising services had the potential to compete with those of Meta, and would have encouraged greater innovation from Meta and other market players. Given the fragility of the competitive dynamic and the domination of the market by Meta at present the loss of potential competition is all the more significant. However, and surprisingly, Meta terminated Giphy's advertising services upon acquisition, removing a potential ad tool for UK businesses. The CMA considers this particularly concerning given Meta controls almost half of the £7 billion display advertising market in the UK.
Tim Cowen, Chair of the Antitrust Practice at Preiskel & Co said:
"The decision is very interesting as a signal for other deals because it is now the leading example of evidence being taken into account of supply side factors and their impact on competition post-merger. This is often a difficult evidential challenge in forward looking merger reviews. Here, the facts appear to have been clear: Giphy was in the USA and was planning to enter the UK. So the CMA had to order disposal of Giphy to ensure that its ability to expand into the UK and compete and drive the innovation that is needed in a dominated market, can now happen. This will be an important consideration in deals such as H3G/Vodafone where dynamic competition, the need for collective investment to support faster 5G roll out, and the nature and extent of post-merger competition will be significant."
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