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Facebook parent company Meta has begun an appeal process against the UK’s competition regulator for blocking the social media giant’s acquisition of GIF company Giphy.

The Competition and Markets Authority (CMA) made the initial order for Meta to unwind its acquisition of Giphy last year. Meta acquired the GIF firm in May 2020.

The regulator said the deal removed competition in display advertising, a conclusion based on the growth of Giphy’s recently developed ad business.

New York-based Giphy’s database allows users to share GIFs via its own website or app or through other platforms such as Facebook or Twitter.

The CMA also warned Meta’s ownership of Giphy could allow it to restrict access to GIFs for competitors of the various platforms owned by Meta, including Facebook, Instagram, and WhatsApp.

The initial ruling made by the CMA marked a major step in the UK’s regulation of major international tech giants.

Meta’s lawyers made the argument that Giphy’s ad platform never had significant market potential in the first place and was therefore not unfairly restricting the market.

Daniel Jowell, of Meta’s legal team, said that the significantly lower offer that Meta rival Snap made to purchase Giphy backed up the wider perception that Giphy’s ads did not have the potential to rival larger competitors.

Snap previously made an informal offer of $142m to acquire Giphy, less than half of the $315m offer from Meta.

Snap went on to acquire Giphy’s competitor Gfycat.

Jowell argued that the “minuscule” revenue of Giphy compared to Meta and Giphy’s lack of ad presence in the UK further supported Meta’s case.

According to Jowell, Giphy’s US revenue was less than 0.05% of the ad revenue made by Meta.

“The decision to block the deal is wrong on the law and the facts, and the evidence does not support the CMA’s conclusions or remedy,” said a spokesperson for Meta.

A CMA spokesperson responded to Meta’s arguments, saying “this merger combined Meta’s significant market power in display advertising and social media with Giphy’s position as a leading provider of free GIFs and GIF stickers in the UK”.

The spokesperson added: “By requiring Meta to sell Giphy, we are promoting competition and innovation in digital advertising and ensuring rival social media providers can get competitive access to Giphy’s services – for the benefit of UK consumers.”

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