Judgment

Judgment of the Tribunal on an application by Meta Platforms, Inc. (“Meta”) for a review under s.120 of the Enterprise Act 2002 (“EA02”) of the decisions of the Competition and Markets Authority (“CMA”) which are contained in its Final Report dated 30 November 2021 (the “Decision”). The Decision concluded that the completed merger between Meta and GIPHY, Inc. (“GIPHY”) has resulted or may be expected to result in a substantial lessening of competition (a) in the supply of display advertising in the UK due to horizontal unilateral effects from a loss of dynamic competition (“Horizontal SLC”) and (b) in the supply of social media services worldwide (including in the UK) due to vertical effects resulting from input foreclosure (“Vertical SLC”). In order to address the Horizontal and Vertical SLCs, the CMA required Meta to (a) sell GIPHY in its entirety to an independent purchaser with the capability and a demonstrable commitment to developing and providing GIF-based advertising in the UK and GIFs to social media platforms, (b) transfer at least US$75 million in cash to GIPHY, and (c) enter into a short-term agreement for the supply of GIPHY’s products.

In its Re-Amended Notice of Application, Meta sought an order quashing the Decision on seven grounds:

1. Ground 1: (i) that the CMA misdirected itself in law or misapplied the test in s.35(1)(b) EA02 in its finding that a Horizontal SLC arose from a loss of dynamic competition, or (ii) that the CMA’s finding of a Horizontal SLC was unreasonable.
2. Ground 2: the CMA’s finding of a Horizontal SLC contradicts or is inconsistent with the CMA’s definition of the market on which it concluded that Meta competes.
3. Ground 3: the counterfactual used by the CMA does not rationally follow from the CMA’s findings of fact and is inadequately specified.
4. Ground 4: the Decision is procedurally flawed and otherwise unlawful because (i) the CMA acted unfairly and/or in breach of its duty to consult under s.104 EA02, or (ii) the excisions to the Decision amounted to an unlawful failure to give reasons.
5. Ground 4A: the Decision is ultra vires and void in its entirety as the determination of the merger reference was unlawfully delegated to the chair of the CMA group and then sub-delegated to CMA staff.
6. Ground 5: the CMA failed properly to assess the remedy it would have imposed in relation to the Vertical SLC in isolation and/or any option beyond the divestment of GIPHY by Meta.
7. Ground 6: In determining the remedy for the Horizontal and Vertical SLCs, the CMA acted irrationally and/or disproportionately, or acted ultra vires s.35(3) EA02.

For the reasons given in the Judgment, the Tribunal unanimously dismissed all of Meta’s Grounds except part of Ground 4. The Tribunal decided that:

1. In relation to Ground 1, the CMA correctly directed itself to the test it had to apply and the decision made by the CMA was one that it was entitled to make.
2. In relation to Ground 2, the CMA acted rationally in order to put itself in a position properly to apply the substantial lessening of competition test in a case of dynamic competition.
3. As regards Ground 3, the CMA’s conclusions as to the counterfactual are, as conclusions in relation the static competition position, unassailable.
4. In respect of the second element of Ground 4, the CMA failed to properly consult and wrongly excised portions from the Decision. In respect of the first element of Ground 4, the Tribunal did not consider it appropriate to consider whether, if its decision had been different in relation to the other element of Ground 4, this ground would have succeeded. 
5. Ground 4A fails as the named individual members of the CMA group are not expected to personally conduct a merger investigation and personally draft the CMA’s provisional findings and final decision.
6. Ground 5 is dismissed as it is predicated on a successful challenge to the Horizontal SLC and the Tribunal has concluded that Meta’s substantive challenges to the Horizontal SLC in Grounds 1 to 3 all fail.
7. On the basis that the CMA’s decisions regarding the Horizontal and Vertical SLCs are unimpeachable, Ground 6 fails as ss.35 and 41 EA02 confer a broad and wide discretion on the CMA in crafting remedies in relation to completed mergers and the remedies ordered by the CMA were not irrational and well within its remedial powers.