Why tech foes are psyched the UK told Meta to sell Giphy

Meta’s enemies have long called for the company to be broken up. Now the U.K. has ordered Giphy spun off — and leapt into the kind of antitrust analysis that disturbs Big Tech.

Giphy logo displayed on a phone screen, along with the reflection of a Meta logo displayed on a laptop screen.

U.S. tech skeptics see international competition enforcers taking aggressive action against companies.

Photo: Jakub Porzycki/NurPhoto via Getty Images

Big Tech foes in the U.S. woke up this week feeling a little envious of the United Kingdom: On Tuesday, the U.K.’s Competition and Markets Authority ordered Meta, formerly known as Facebook, to sell Giphy to address concerns about the impact of the deal on competition.

For reasons big and small, that decision moves us one step closer to the world that champions of bringing down the competition hammer on Meta and other Big Tech companies want to see in the U.S.

Tech skeptics have for years rallied around calls to break up Facebook, even as they know any path to do so through the U.S. courts is unsure and would, at best, take years. The U.K. regulator, meanwhile, ordered Meta to unwind the $315 million purchase of Giphy, just a year and a half after Facebook said it would buy the search engine, hosting and sharing platform for animated GIF images.

“Facebook built its monopoly power through a series of brazenly anticompetitive acquisitions, of which Giphy is a great example,” said Robyn Shapiro, director of communications for the American Economic Liberties Project, a group advocating for the expansion of antitrust thinking to curb tech companies. “The U.K.’s Competition and Markets Authority is right to unwind this illegal merger.”

Meta can still appeal the decision, and said it is considering doing so. But even aside from achieving a partial breakup, the CMA took on the deal in a way that advocates for increased competitive scrutiny liked a whole lot.

The decision, after all, marks a rare attempt to reverse a Big Tech deal. Digital giants such as Meta, Google and Amazon have often grown by making many small but deeply tactical acquisitions. Until recently, however, antitrust enforcers rarely paid attention to any individual transaction that appeared to have only a nominal financial value. In many cases, the companies didn’t even have to report the purchases to regulators: For example, Giphy paid a dividend to investors ahead of the transactions that lowered the company’s assets enough that Facebook wasn’t even required to report the deal to competition regulators.

“This is a problem that’s probably especially acute with tech,” said Alex Petros, policy counsel at Public Knowledge, a think tank that calls for more antitrust scrutiny of tech companies. “There are a lot of companies, like Giphy for example, that can have a lot of users [and] be a potential internet bottleneck without having a huge dollar value.”

Petros said the CMA’s analysis particularly reflected the ways past antitrust doctrine missed issues that are unique to the tech industry. Enforcers, for instance, have previously often doubted a small company could present a clear competitive threat to a huge one. The U.K. regulator had explicitly called Giphy “a potential challenger to Facebook” due to its “innovative” approach to digital display advertising, which allowed brands to promote themselves with GIFs before Facebook shut the service down.

Although U.S. antitrust analysis is concerned with acquisitions that may substantially lessen competition, Big Tech critics say enforcers have taken too narrow a view of what kinds of firms might constitute competitive threats to tech giants with expansive business models. Critics also say competition authorities have been too shy about projecting into the future and have often overlooked transactions involving firms that are in the midst of the kind of runaway growth that can occur with digital businesses.

U.S. enforcers have recently caught up to some of these criticisms. The Federal Trade Commission filed suit against Facebook about a year ago, alleging the company engaged in a pattern of anticompetitive acquisitions of small rivals with high potential. The FTC is also seeking to break up Meta by unwinding its acquisitions of WhatsApp and Instagram.

The lawsuit’s outcome is far from guaranteed, however, particularly after a judge threw out the FTC’s first complaint over the summer, and the clash is almost certain to spend several years in a lengthy appeals process.

Twisting up

Meta has previously said its investments in WhatsApp and Instagram are what made the apps so successful, and has suggested neither was on a trajectory to challenge Facebook. The company made the same claim for Giphy. “Both consumers and GIPHY are better off with the support of our infrastructure, talent, and resources,” the company said in a statement. The CMA also said Facebook had argued “it was likely that GIPHY would have become a significantly weakened business had it not been bought by Facebook.”

The U.K. regulator went beyond framing Meta and Giphy as head-to-head competitors, and considered the possibility that Meta could use Giphy to hurt TikTok, Twitter, Snap and other rivals by denying or limiting their access to GIFs. The analysis took seriously the notion that the deal would mean the larger company could exert its power in the social media supply chain to hurt competitors, the way a shoe manufacturer might buy a company selling laces and then cut off rival footwear makers.

In antitrust-speak, such arrangements are said to be “vertical” deals, rather than horizontal relationships between direct competitors. Since the late 1970s, competition law practitioners influenced by conservative jurist Robert Bork have argued that this kind of integration is less likely to be anticompetitive than deals where two companies producing the same thing merge. Supporters and scholars in favor of this legal theory say such deals don’t eliminate competitors, but instead tend to create savings that companies can pass on to customers. Businesses have continued to argue vertical arrangements don’t necessarily offer tech much additional power.

“Giphy no more has a monopoly over GIFs than Chipotle has a monopoly over burritos,” Adam Kovacevich, a former Google policy official who now runs a trade association for Big Tech companies, said in a tweet.

The CMA argued, however, that Facebook had “an incentive to foreclose its rivals from access to Giphy” and would face few costs for doing so.

Skepticism of vertical arrangements has been growing on both sides of the Atlantic as well as both sides of the aisle in the U.S., particularly as tech companies have drastically expanded their vertical integration. In 2020, the FTC, which was then led by Republicans, revamped its guidelines on the practice and elaborated on new potential areas of harm to consider during merger review. The commission’s Democrats complained the new approach still treated vertical deals as too likely to be beneficial.

In September, the FTC, now led by Democratic chair Lina Khan, rescinded the guidance, and the Justice Department, which also enforces competition law, announced it was undertaking a “careful review” of its guidelines “to ensure they are appropriately skeptical of harmful mergers.”

Petros of Public Knowledge praised the way the U.K. looked at the vertical components of the Giphy deal and said he hoped the regulator’s conclusions could provide a model in the U.S. — particularly with Khan in charge at the FTC and Jonathan Kanter, another favorite of tech skeptics, having received Senate approval to be the next antitrust head at the Justice Department.

“For the longest time, vertical deals were just kind of waved through,” Petros said. “That’s very much changing, and I think that’s a really good thing and something that I hope U.S. enforcers take note of.”


A pro-China disinformation campaign is targeting rare earth miners

It’s uncommon for cyber criminals to target private industry. But a new operation has cast doubt on miners looking to gain a foothold in the West in an apparent attempt to protect China’s upper hand in a market that has become increasingly vital.

It is very uncommon for coordinated disinformation operations to target private industry, rather than governments or civil society, a cybersecurity expert says.

Photo: Goh Seng Chong/Bloomberg via Getty Images

Just when we thought the renewable energy supply chains couldn’t get more fraught, a sophisticated disinformation campaign has taken to social media to further complicate things.

Known as Dragonbridge, the campaign has existed for at least three years, but in the last few months it has shifted its focus to target several mining companies “with negative messaging in response to potential or planned rare earths production activities.” It was initially uncovered by cybersecurity firm Mandiant and peddles narratives in the Chinese interest via its network of thousands of fake social media accounts.

Keep Reading Show less
Lisa Martine Jenkins

Lisa Martine Jenkins is a senior reporter at Protocol covering climate. Lisa previously wrote for Morning Consult, Chemical Watch and the Associated Press. Lisa is currently based in Brooklyn, and is originally from the Bay Area. Find her on Twitter ( @l_m_j_) or reach out via email (ljenkins@protocol.com).

Some of the most astounding tech-enabled advances of the next decade, from cutting-edge medical research to urban traffic control and factory floor optimization, will be enabled by a device often smaller than a thumbnail: the memory chip.

While vast amounts of data are created, stored and processed every moment — by some estimates, 2.5 quintillion bytes daily — the insights in that code are unlocked by the memory chips that hold it and transfer it. “Memory will propel the next 10 years into the most transformative years in human history,” said Sanjay Mehrotra, president and CEO of Micron Technology.

Keep Reading Show less
James Daly
James Daly has a deep knowledge of creating brand voice identity, including understanding various audiences and targeting messaging accordingly. He enjoys commissioning, editing, writing, and business development, particularly in launching new ventures and building passionate audiences. Daly has led teams large and small to multiple awards and quantifiable success through a strategy built on teamwork, passion, fact-checking, intelligence, analytics, and audience growth while meeting budget goals and production deadlines in fast-paced environments. Daly is the Editorial Director of 2030 Media and a contributor at Wired.

Ripple’s CEO threatens to leave the US if it loses SEC case

CEO Brad Garlinghouse said a few countries have reached out to Ripple about relocating.

"There's no doubt that if the SEC doesn't win their case against us that that is good for crypto in the United States,” Brad Garlinghouse told Protocol.

Photo: Stephen McCarthy/Sportsfile for Collision via Getty Images

Ripple CEO Brad Garlinghouse said the crypto company will move to another country if it loses in its legal battle with the SEC.

Garlinghouse said he’s confident that Ripple will prevail against the federal regulator, which accused the company of failing to register roughly $1.4 billion in XRP tokens as securities.

Keep Reading Show less
Benjamin Pimentel

Benjamin Pimentel ( @benpimentel) covers crypto and fintech from San Francisco. He has reported on many of the biggest tech stories over the past 20 years for the San Francisco Chronicle, Dow Jones MarketWatch and Business Insider, from the dot-com crash, the rise of cloud computing, social networking and AI to the impact of the Great Recession and the COVID crisis on Silicon Valley and beyond. He can be reached at bpimentel@protocol.com or via Google Voice at (925) 307-9342.


The Supreme Court’s EPA ruling is bad news for tech regulation, too

The justices just gave themselves a lot of discretion to smack down agency rules.

The ruling could also endanger work on competition issues by the FTC and net neutrality by the FCC.

Photo: Geoff Livingston/Getty Images

The Supreme Court’s decision last week gutting the Environmental Protection Agency’s ability to regulate greenhouse gas emissions didn’t just signal the conservative justices’ dislike of the Clean Air Act at a moment of climate crisis. It also served as a warning for anyone that would like to see more regulation of Big Tech.

At the heart of Chief Justice John Roberts’ decision in West Virginia v. EPA was a codification of the “major questions doctrine,” which, he wrote, requires “clear congressional authorization” when agencies want to regulate on areas of great “economic and political significance.”

Keep Reading Show less
Ben Brody

Ben Brody (@ BenBrodyDC) is a senior reporter at Protocol focusing on how Congress, courts and agencies affect the online world we live in. He formerly covered tech policy and lobbying (including antitrust, Section 230 and privacy) at Bloomberg News, where he previously reported on the influence industry, government ethics and the 2016 presidential election. Before that, Ben covered business news at CNNMoney and AdAge, and all manner of stories in and around New York. He still loves appearing on the New York news radio he grew up with.


Microsoft and Google are still using emotion AI, but with limits

Microsoft said accessibility goals overrode problems with emotion recognition and Google offers off-the-shelf emotion recognition technology amid growing concern over the controversial AI.

Emotion recognition is a well-established field of computer vision research; however, AI-based technologies used in an attempt to assess people’s emotional states have moved beyond the research phase.

Photo: Microsoft

Microsoft said last month it would no longer provide general use of an AI-based cloud software feature used to infer people’s emotions. However, despite its own admission that emotion recognition technology creates “risks,” it turns out the company will retain its emotion recognition capability in an app used by people with vision loss.

In fact, amid growing concerns over development and use of controversial emotion recognition in everyday software, both Microsoft and Google continue to incorporate the AI-based features in their products.

“The Seeing AI person channel enables you to recognize people and to get a description of them, including an estimate of their age and also their emotion,” said Saqib Shaikh, a software engineering manager and project lead for Seeing AI at Microsoft who helped build the app, in a tutorial about the product in a 2017 Microsoft video.

Keep Reading Show less
Kate Kaye

Kate Kaye is an award-winning multimedia reporter digging deep and telling print, digital and audio stories. She covers AI and data for Protocol. Her reporting on AI and tech ethics issues has been published in OneZero, Fast Company, MIT Technology Review, CityLab, Ad Age and Digiday and heard on NPR. Kate is the creator of RedTailMedia.org and is the author of "Campaign '08: A Turning Point for Digital Media," a book about how the 2008 presidential campaigns used digital media and data.

Latest Stories