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Big Tech braces for disruption as UK opens new era of enforcement – POLITICO

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Despite all the outrage directed at Big Tech over the past decade, regulators have avoided the nuclear option of shattering a major platform.

Until this week, that is.

By ordering Facebook to part ways with Giphy, a GIF creation platform acquired in 2020, the UK Competition and Markets Authority has broken a global taboo and ushered in a brave new world of technology application.

The move took center stage at a gathering of competition authorities from G7 countries and is expected to encourage prominent supporters of busting Big Techs, such as US Senator Elizabeth Warren and US anti-trust chief. Lina Khan – while making skeptics think about EU digital. Tsar Margrethe Vestager.

“This is a watershed moment for merger review in Europe and globally,” said Björn Herbers, antitrust lawyer at CMS law firm. “The CMA is testing the ground for other authorities.”

As lawyers and politicians digest the news, several have pointed out that the CMA’s decision is part of a global trend towards stricter enforcement of antitrust and other rules.

In Washington, Khan’s appointment as head of the Federal Trade Commission signaled bolder action against the giants of Silicon Valley. In the EU, authorities are rolling out new rules to limit the expansion of the giants. And in China, authorities are cracking down on the tech industry, fining dozens of companies that have not sought approval of past deals.

Yet the CMA has gone further than any of those authorities, who, despite their harsh rhetoric, have made dozens of major Big Tech acquisitions in recent years, including the much-scrutinized acquisition by Wearable tech maker Fitbit’s Google, which Vestager approved in December. from last year.

Now these agents will be watching the CMA to see if they are able to pull off what promises to be messy decoupling – and decide whether they should follow in its footsteps.

Among the potential targets: an acquisition of the Grail by cancer test start-up US gene sequencing giant Illumina, which will be reviewed by the European Commission by February 4; US chipmaker Nvidia’s planned $ 40 billion acquisition of UK chip designer Arm; and the planned acquisition by Facebook of the Kustomer customer interaction platform.

High risk surgery

On the first score, the CMA is in a complex operation.

“The divestiture of the Giphy business poses particular challenges resulting from the finalization of the merger and related actions of Facebook,” the CMA said in its final report on the decision.

In June last year, the authority issued an order to keep the company separate while the merger investigation was ongoing. However, prior to the order, Facebook had already taken some steps, such as transferring back office functions from Giphy to Facebook and transferring almost all of Giphy’s staff to Facebook employment contracts.

Now, all of that will have to be undone and reversed – including offering incentives for former Giphy employees to return to Giphy, recruiting new people to replace key staff who decide not to move, and giving back to Giphy. company sufficient financial resources to stand up. his own feet – confronting the AMC with a task that goes far beyond its usual investigation and monitoring of remedies.

Facebook, which has four weeks to appeal the CMA’s decision, will spare no effort and billable time to try to prevent the break order from being executed.

Meanwhile, the CMA will need to stay focused even as public criticism of the Breakdown Order grows stronger and Big Tech advocates rally around the orthodoxy that allows thousands of tech mergers to happen. largely unchallenged.

One important criticism is the CMA’s rationale for breaking, which targets a relatively small Meta property compared to a revenue engine like, say, WhatsApp.

“The justifications for the CMA seemed slim to me,” said Sam Bowman, director of competition policy at the International Center for Law and Economics.

He focused on the authority’s assertion that Giphy would one day become a competitor to Facebook because it is difficult to defend in court.

Giphy: A real Facebook competitor?

Even so, Bowman said the CMA’s decision was to write on the wall for large rigs.

“If Giphy represents a significant potential challenger for Facebook, then many other companies must also represent a significant potential challenger for Facebook,” he said.

Andreas Aktoudianakis, digital policy expert at the European Policy Center, pointed out that while tech companies have been shown to be remarkably good at persuading antitrust authorities around the world to approve their mergers, Facebook has not done so in this instance.

“Facebook has struggled to justify to the CMA how the acquisition would benefit the broader platform ecosystem,” he said, adding that the age-old trope of large companies justifying the mergers by saying that ‘they would benefit consumers has passed its expiration date.

“In the US private sector there is a tradition of talking about the importance of consumer benefits, but in Europe we are more interested in consumer rights,” he added.

If the CMA is successful, other controversial mergers may still be considered. These include Facebook’s acquisition of Instagram in 2012 and WhatsApp in 2014. The deals, which helped the company build its social media empire, are at the center of a legal battle between the company and the US FTC, which wants a court to order the sale. of the two companies.

But even if the CMA fails, a strong signal has already been sent that won’t be forgotten anytime soon.

Facebook has already paid a substantial price for its $ 315 million acquisition of Giphy, including a £ 50.5 million fine from the UK regulator for flouting an order to prevent the two companies from merging, and a fine of EUR 9.6 million from the Austrian competition authority on failure to notify the decision.

Further upheavals could still arise, as the merger is still the subject of an ongoing investigation in Austria, where the country’s cartel court is expected to rule in early 2022, a spokesperson for the authority confirmed.

The CMA’s decision this week came as competition authorities from G7 countries met in London to discuss how to improve collaboration in digital markets.

The British authority is hopeful that his decision may have had some sort of impact on the approaches of colleagues around the world. A joint document released as part of the talks noted how “there are widespread concerns about the historic under-application of digital mergers.”

“Antitrust authorities everywhere have a better understanding of the industry and the obvious risks associated with the domination of these companies,” said Jo Seldeslachts, professor of competition policy at the Belgian university KU Leuven.

“It’s clear that the winds have turned for big tech companies, but we’ll have to wait to understand what the CMA’s decision means in concrete terms,” ​​he added.

CORRECTION: A previous version of this report inaccurate the purchase price of Giphy. It’s $ 315 million.

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