The UK Competition Authority orders Facebook to sell Giphy​

By Jake Rickman​

What do you need to know this week?

The UK Competition and Markets Authority (CMA) has ordered Facebook to sell Giphy, which it acquired last year for $315m. The CMA determined that the takeover reduced competition between social media platforms and had the potential to hamper future innovation in digital advertising. Facebook’s “significant market power” was a key factor in the CMA’s determination.

The fact that the CMA ordered Facebook’s acquisition of Giphy to be unwound after the transaction had completed is a reminder that the body has real authority to intervene in the market.

The CMA has increasingly adopted a more aggressive stance against Big Tech companies like Meta, largely because of their tendency in the past few years to use the “buy and bury” model to suppress competition. This refers to large companies like Facebook purchasing smaller companies that could be competitors.

The CMA is the nation’s regulatory body that investigates mergers and acquisitions (M&A) to ensure that they do not offend anti-competition laws, which are designed to protect consumers from an abuse of monopoly power.

Why is this important for your interviews?

Being able to discuss why Facebook is now having to find another buyer for Giphy will demonstrate to interviewers that you appreciate the function of anti-competition laws and the wide-ranging implications for corporate deals.

Additionally, competition law is important if you are presented with a written exercise or case study where you are asked to advise a client on a proposed acquisition. This is especially true if the client or target company is particularly large, or you see a reference to market share percentages. Even a passing comment on the need to ensure a deal does not trigger the CMA’s thresholds for investigation will demonstrate to your interviewers you have a holistic understanding of a corporate transaction.

How is this topic relevant to law firms?

For many M&A deals, ensuring that the transaction does not breach any anti-competition laws is a vital part of any deal. This is particularly true for deals involving clients with large market shares. This means that competition teams can be as important for a deal as corporate, finance, and tax teams.

Put another way, lawyers advise clients on ways to avoid risk. Having the CMA intervene in a deal after it has completed and order a de-merger is one of the worst possible outcomes. Meta will now have to spend substantial time and money to sell Giphy.