The UK competition regulator CMA (Competition and Markets Authority) has fined Facebook £50.5 million (approx. $70 million) for breaching an order imposed during its investigation into the firm’s Giphy acquisition. The CMA alleges that the social media giant deliberately withheld information related to the $400 million purchase of the popular GIF repository, which it announced in May last year.
In June 2020, the CMA had issued an initial enforcement order (IEO) to Facebook after it announced the Giphy acquisition. These types of orders prevent companies from merging while an investigation is ongoing. The companies would require to function as they would have without the merger for as long as the investigation isn’t complete.
As part of this process, Facebook was required to provide regular updates to the CMA about its compliance with the IEO. However, the UK watchdog alleges that the company “significantly limited the scope of those updates”. It didn’t budge despite repeated warnings from the regulatory body, deliberately refusing to report all the required information.
This is the first time the UK competition regulator has found a company consciously refusing to comply with such orders. As a result, the CMA has now issued a £50 million fine to Facebook. It has also fined the company another £500,000 for swapping its Chief Compliance Officer twice without permission during the investigation. The CMA says it’s a major breach that “fundamentally undermined its ability to prevent, monitor and put right any issues.”
The CMA will continue to probe Facebook’s Giphy acquisition
In April this year, the CMA announced an in-depth investigation into Facebook’s Giphy acquisition citing competition concerns. The regulators are concerned that a merger of the two companies will reduce competition in the digital advertising market. Facebook is already a dominant force in this space and by acquiring Giphy, it could further increase its market power.
While the CMA hasn’t decided about this merger yet, it announced that the investigation is ongoing. Meanwhile, the regulators hope that the recent fine would serve as a warning to Facebook.
“We warned Facebook that its refusal to provide us with important information was a breach of the order but, even after losing its appeal in two separate courts, Facebook continued to disregard its legal obligations,” said Joel Bamford, Senior Director of Mergers at the CMA. “This should serve as a warning to any company that thinks it is above the law.”
Facebook has found itself in such adversities numerous times in the past, mostly for its own shady behaviors. The company has developed a bad reputation because of this all. Perhaps that’s why it is looking to undergo a rebranding so it could build the “metaverse” with a new name.