Unfriends! Facebook’s war with the competition and markets authority could end in a £ 3 billion fine
Facebook has become embroiled in an explosive feud with the UK market watchdog that could result in a fine of up to £ 3 billion.
The social media giant has lost a lawsuit to overturn an injunction from the Competition and Markets Authority in June requiring Facebook to shut down a large number of business activities, while officials took over the $ 400 million (£ 300 million).
Facebook, founded and run by 36-year-old Mark Zuckerberg, is now under investigation after court documents showed it could not ‘certify’ compliance with the watchdog edict.
Tension: Facebook, founded by Mark Zuckerberg, has lost a lawsuit with the CMA
For each breach, the CMA could impose a fine of up to 5 percent of Facebook’s revenue, court documents reveal, which totaled $ 70 billion last year.
Facebook’s feud with the watchdog is the latest sign of the growing tension between the US tech giants and UK regulators.
The CMA has pledged to crack down on the hundreds of takeovers by the tech titans under what has been called their ‘killer’ strategy that stifles competition.
Last week, the watchdog started a consultation to address harmful acquisitions by the digital giants. It comes with plans that could prevent Facebook, Google and other internet giants from gobbling up hundreds of start-ups that would otherwise grow into rivals. The plans were first revealed by The Mail on Sunday last month.
The CMA wants to block mergers and acquisitions, even if there is little chance that competition will be harmed in the future. It also tries to prevent tech giants from using their power to enter new markets.
But the bitter feud between Facebook and the watchdog over the Giphy acquisition indicates that any future appearance will be heavily contested by the tech companies. Giphy is a library of images, or Gifs, that social media users can send messages to apps like Twitter, Instagram, and Facebook. It is one of the biggest sources of Gifs, and Facebook has been using its technology in its apps for years. According to Facebook, half of Giphy use comes through apps owned by Facebook, including Instagram and Facebook Messenger.
Under the acquisition plans, Giphy, which was founded in 2013, will join the team working on Instagram.
However, the CMA struck down an injunction on Facebook banning certain business activities while investigators are investigating the giant’s takeover of Giphy.
The CMA is concerned that the Facebook acquisition could cause irreversible damage to Giphy’s competitors if it continued unchecked. The CMA is particularly concerned that Facebook could cancel its current contract with Giphy’s rival Tenor. The CMA said this could eventually force Tenor to quit.
The watchdog normally asks merging companies to remain as separate entities during a takeover policy. This is so that the target company can be sold again if it blocks the deal.
Facebook complained that according to court documents, the injunction was “irrational and disproportionate” due to its close relationship with Giphy.
But the court ruled that the watchdog remained valid in his decision until he received compelling reason from Facebook to change the terms. The CMA is now investigating whether Facebook has halted its business operations as required, after the company suggested it could not fully comply with the injunction.
The amount of a possible fine depends on the seriousness of a possible violation. The CMA fined PayPal £ 250,000 in a similar case in 2019. According to court documents, the fine in the Giphy case could be as much as £ 3 billion. Lord Tyrie, the former chairman of the CMA, has said companies should face higher fines if they refuse to cooperate with the watchdog. The government is now examining the proposals it has made to strengthen the authority in 2019.
Within weeks, the CMA will unveil its plans to regulate the increasingly powerful technology giants.
Dr Andrea Coscelli, head of the CMA, finalizes proposals that could be pushed by Parliament in 2021.
He is expected to call for the creation of a Digital Markets Unit to enforce a code of conduct to ensure tech titans don’t exploit consumers and ban rivals from the market.
The ideas are all based on an influential Treasury report published last year by President Obama’s former chief economist Jason Furman, who criticized the technology giant’s “ cutthroat ” takeovers of potential rivals.
Dr. Coscelli has also noted Google and Facebook’s dominance in the digital advertising market. He warned they are now in an ‘untouchable position’ after stealing two-thirds of the £ 13 billion market in 2019.
Commenting on the Giphy case and a potential fine, a Facebook spokesperson said: ‘We are fully cooperating with the UK competition and market authority investigation and will continue to do so.
“We are reviewing the Tribunal’s decision and considering our options.”