Facebook’s Appeal of UK CMA’s Decision on Giphy Deal Is Not Just About the Case

Facebook’s decision to appeal the U.K. CMA’s negative ruling over its Giphy deal may seek to revert not only the fate of this case, but also the approach taken by the regulator in the last two years on merger control.

On Thursday (Dec. 23), the company announced its intention to appeal the U.K.’s antitrust decision that ordered Facebook (now Meta) to sell Giphy. The U.K. regulator ordered the sale “because the merger could allow Facebook to increase its significant market power in social media even further.”

Some experts in the field saw the decision taken by the regulator as unusual, as Giphy’s size and revenue in the U.K. could be considered too low for the regulator to have jurisdiction. Additionally, the regulator didn’t deem appropriate any other remedy to address the antitrust concerns associated with selling the company. Yet, the CMA’s move to increase the scrutiny over Big Tech deals may also be interpreted as bold, as regulators have also been criticized for doing too little, too late since the Facebook-WhatsApp case.

The appeal will now go to the Competition Appeal Tribunal, a specialized court with vast experience in reviewing this type of decision. The theories of harm that the tribunal will need to analyze are evidence-driven, and the regulator may face an uphill road to probe its findings in court. This is because the analysis involves hypothetical scenarios where the court needs to decide what effects the merger would cause in the market, leaving certain discretion for the interpretation of the facts. However, the CMA has been able to prove similar theories of harm in other cases.

The relevance of this case is not in the case itself, as it is immaterial for Meta, but on the consequences that a strict application of competition rules may have for small firms and venture capital investors, who seek acquisitions as an exit strategy. This is particularly relevant for Giphy, which after 18 months of investigation could be back to square one, looking for alternatives to get funds. While this is not an excuse to allow a more permissible approach by regulators when they find antitrust concerns, it is not the first time the CMA has found itself in a similar situation.

In 2020, the CMA cleared Amazon’s 16% investment in Deliveroo after an in-depth investigation. In this case, the regulator faced similar criticisms. First, the acquisition was a non-controlling shareholding. After the initial review, the regulator found significant concerns. And just after analyzing what options Deliveroo could have without Amazon’s support (this was in the middle of the pandemic), the CMA found that there were no concerns.

The decision from the court will only provide an answer to whether the CMA’s decision was right or wrong, but it could encourage or deter the regulator to continue with this approach in merger control.