CMA Fines Facebook £50m Over Giphy Deal

Facebook is in hot water with the UK competition regulator due to its failure to follow investigation procedures. 

Facebook has been hit with a £50 million fine by the Competition and Markets Authority (CMA) in relation to its investigation into the tech titan’s acquisition of Giphy.

Though the CMA repeatedly notified Facebook, the firm failed to properly report its compliance per the initial enforcement order (IEO) in June 2020 upon starting its investigation into the acquisition.

As reported by eWeek UK in August, the CMA provisionally found Facebook’s ownership of Giphy to be potentially damaging to the market.

In the latest twist in the tale, the CMA calls Facebook’s actions “consciously refusing” to follow procedures and stated that this was the first instance where a company had breached this IEO protocol in this way. And considering the warnings CMA issued to Facebook, it is unlikely that this is just a mere oversight.

The CMA implemented the IEO to guarantee that both companies in the merger would resume competition as they would regardless of the Giphy purchase and that they would not conduct any further business consolidation during the ongoing investigation. The IEO process required Facebook to provide the CMA with updates and compliance reports for the IEO. These reports are necessary for the CMA to carry out its investigation and monitor Facebook’s behaviour that may affect the investigation results.

Though this is the first time any company has breached an IEO, this is not the first time the CMA has issued a fine to Facebook for their actions. Additionally, a £500,000 fine occurred due to Facebook’s changing its Chief Compliance Officer two times without gaining prior consent from the CMA.

The CMA’s regulatory practices have all been for the purpose of monitoring the merger to ensure fair competition in markets and rule out foul play by either company. Facebook’s failure to comply with these conditions only further supports the idea that the company may be establishing a monopoly on digital display advertising, with its acquisitions and business practices causing detrimental effects to the market.

After all, since Facebook purchased Giphy in 2020 for $400 million (£290 million), Giphy terminated its previous business deals with Dunkin Donuts and Universal Studios. By buying out other tech companies and ending its partnerships with other companies, Facebook could lessen competition and cause severe damage to the UK tech market, which the CMA is trying to avoid. And with Facebook’s refusal to cooperate with CMA’s orders, it may be doing so as a deliberate tactic to continue its company growth, despite the cost of fines.

So how will Facebook’s actions, or lack thereof, regarding this IEO affect its status moving forward? It certainly has not helped the CMA to perform its investigation processes. Overall we will have to see how Facebook’s neglect of CMA’s rules plays a part in its future business decisions and affects its standing in the digital display advertising market.

In other news, last month the CMA cleared the $1 billion (£729 million) acquisition by Facebook of customer relationship management (CRM) platform Kustomer.

Madeline Clarke
Madeline Clarke is a freelance writer specialising in copywriting and content creation. After studying Art and earning her BFA in Creative Writing at Salisbury University (Maryland) she applied her knowledge of writing and design to develop creative and influential copy. She has since formed her own business, Clarke Content, LLC.

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