CMA order for Meta to sell Giphy could undermine digital trade and innovation, says IEA regulation expert
30 November 2021
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Commenting on the news that Facebook’s parent company, Meta, has been ordered to sell Giphy by the UK’s Competition and Markets Authority, Victoria Hewson, Head of Regulatory Affairs at free market think tank the Institute of Economic Affairs, said:
“The CMA’s conclusion that Facebook’s acquisition of Giphy must be reversed because it would damage competition between social media platforms and harm consumers is a worrying sign of the competition regulator’s activist position in digital services.
“By directing Meta to divest Giphy and undo the deal, the CMA has asserted jurisdiction over two US companies, on the basis of weak and speculative evidence of how Giphy might have been able to run its business if Facebook hadn’t bought it.
“This will send a message to tech startups, entrepreneurs, and their investors, that successful platforms looking to improve their services will not be allowed to acquire them, cutting off an important incentive for innovation.
“The decision seems to undermine the International Trade Secretary’s calls for barriers to digital trade and investment to be brought down, and efforts to position this country as a leading hub for innovation and associated financial services.
“If it stands, the CMA’s conclusion that it has the power to reverse the acquisition of a small company, providing a niche service that hadn’t even turned a profit so far, would undermine the government’s case that its new Digital Markets Unit needs still greater powers to block mergers in the tech sector.”
ENDS
Notes to editors
Contact: Emily Carver, Head of Media, 07715 942 731
IEA spokespeople are available for interview and further comment.
“The CMA’s conclusion that Facebook’s acquisition of Giphy must be reversed because it would damage competition between social media platforms and harm consumers is a worrying sign of the competition regulator’s activist position in digital services.
“By directing Meta to divest Giphy and undo the deal, the CMA has asserted jurisdiction over two US companies, on the basis of weak and speculative evidence of how Giphy might have been able to run its business if Facebook hadn’t bought it.
“This will send a message to tech startups, entrepreneurs, and their investors, that successful platforms looking to improve their services will not be allowed to acquire them, cutting off an important incentive for innovation.
“The decision seems to undermine the International Trade Secretary’s calls for barriers to digital trade and investment to be brought down, and efforts to position this country as a leading hub for innovation and associated financial services.
“If it stands, the CMA’s conclusion that it has the power to reverse the acquisition of a small company, providing a niche service that hadn’t even turned a profit so far, would undermine the government’s case that its new Digital Markets Unit needs still greater powers to block mergers in the tech sector.”
ENDS
Notes to editors
Contact: Emily Carver, Head of Media, 07715 942 731
IEA spokespeople are available for interview and further comment.
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I’ve worked in technology since the late 1980s when IBM was a badly behaved defacto monopolist, which caused immense harm to both competitors and end-users in the industry, using lock-in to the proprietary IBM ecosystem to suppress demand for innovative products from competitors.
Over the years there have been a succession of companies that have that de-facto monopoly power, and it is often abused once opportunities for a company’s organic growth have been exhausted.
Given the current defacto monopoly position that Meta holds, and especially bearing its history of playing fast & loose with privacy, in this case the CMA is correct to prevent further dominance of this market by Meta.