COMMERCIAL DISPUTE RESOLUTION AND LITIGATION

The Competition and Markets Authority is not afraid to take on the big guys

On 4 February 2022 after a long investigation, the CMA handed down fines (officially termed ‘a Penalty’) on Meta Platforms Inc/ Facebook Inc. (Meta) in relation to its takeover of GIPHY.

This is the first time the CMA has found a company to have acted in a way as to breach one of its orders on purpose.

Meta (then Facebook) bought GIPHY on 15.05.2020. The CMA issued interim measures to take effect from 09.06.2020. The effect of the Initial Enforcement Order was that Facebook should operate the two companies separately.

In its initial findings the CMA decided that the merger would result in a lessening of competition in the social media and display advertising.

The CMA has powers to make interim orders to ‘hold the ring’ whilst it investigates what it feels might be a breach of competition law or the effect of a merger on the relevant market. Its job is to prevent monopolies from being created.

In its final report, the CMA ordered what is now Meta to sell or ‘divest’ itself of GIPHY. So, the powers of the CMA are sweeping.

Both Corporations are based outside the UK. Which is another point of interest.

Not only that, the IEO ordered Facebook, as it then was, to supply information updates to the CMA to show its compliance with the interim order to keep the two businesses running separately whilst it came to a final decision. When Facebook ‘consciously refused, (source; https://www.gov.uk/government/news/cma-fines-facebook-over-enforcement-order-breach) to supply this information, the CMA fined Facebook again in the sum of £50.5m. It is unprecedented for the CMA to have made the finding of conscious refusal to supply information required under an IEO.

The final divestiture order came into force on 29.03.2022.

It matters not how big you are or even that you are based outside the UK, if you break the rules, the CMA will intervene.

The CMA has powers to ‘undo’ a merger, as it did in this case, if it takes the view that competition in the relevant market sector will be significantly impaired.

The CMA can issue orders (Interim Enforcement Orders) to preserve the market whilst it investigates. If you break the IEO, you will be fined.

What makes this case interesting is that it is the first time the CMA has found a Party to an IEO broke the terms of that IEO on purpose and with intent to do so.

In this writer’s view, the CMA were wrong to set the fine for intentional breach of its order at £50.5m. Meta will not even blink at £50.5m. The fine for intentional breach really ought to have been higher.

Jonathan Compton
LLB LLM Solicitor Barrister MCIArb.

About the authors


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Jonathan Compton

Partner

Specialist in commercial disputes, banking and finance, regulatory and anti-trust/competition law.

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