Facebook — or whatever name the tech giant picks for a reportedly looming rebrand of its data-mining empire as it seeks to teleport its business into the metaverse to escape the unending cavalcade of toxic publicity its execs generate — has a new ‘bad behavior’ badge to sport: It’s just been fined nearly $70 million (£50.5M) by a UK watchdog for deliberately withholding information related to ongoing antitrust oversight of its acquisition of Giphy.
It’s the first time the UK’s competition watchdog has found a company to have breached this type of order — by “consciously refusing to report all the required information”, as it puts it.
So that looks like an epic win for Facebook’s current PR strategy of not giving two f***s what anyone else thinks of it.
The tech giant has also of course recently acquired an expensive taste in self-configured ‘accountability apparatus’ (aka the self-styled ‘Facebook Oversight Board’) — which may have caused it some confusion over its legal requirements to comply with actual oversight bodies that exist within democratic societies.
But that might be a too generous an interpretation of what Facebook is doing here.
The back story is that the UK’s Competition and Markets Authority (CMA) has been scrutinizing Facebook’s acquisition of the animated GIF repository for well over a year now. But back in April, a new, in-depth phase of the probe was announced — after the regulator found concrete reasons to be concerned that Facebook owning Giphy would further reduce competition in the (already Facebook-dominated) digital advertising market.
In a statement at the time a faceless Facebook spokesperson claimed the tech giant would “continue to fully cooperate with the CMA’s investigation”. However it turns out even that Facebook claim was fake.
Per the CMA, Facebook has failed to follow the standard oversight process — failing to provide the regulator with required information related to an initial enforcement order (IEO) placed on it by the watchdog, despite repeated requests for it to do so.
Facebook’s actions are such that they have led the CMA to conclude that non-compliance was deliberate. Hence the meaty penalty for what the CMA describes as a “major” breach.
“This is the first time a company has been found by the CMA to have breached an IEO by consciously refusing to report all the required information,” it writes. “Given the multiple warnings it gave Facebook, the CMA considers that Facebook’s failure to comply was deliberate. As a result, the CMA has issued a fine of £50 million for this major breach, which fundamentally undermined its ability to prevent, monitor and put right any issues.”
The tech giant was also criticised last year by the Competition Appeal Tribunal and Court of Appeal over its lack of cooperation with the CMA — with judges calling it out over what they suggested “might be regarded as a high-risk strategy” in relation to not complying with the IEO and not keeping the CMA updated as the order required.
An IEO is intended to place a freeze on any further integration and ensure companies can continue to compete against each other in situations where an acquisition that’s under antitrust scrutiny has already been completed, as is the case with the Facebook-Giphy buy.
Facebook has been under a CMA IEO order since June 2020 in relation to its purchase of Giphy. But the watchdog said today that the tech giant “significantly limited” the scope of required updates related to its compliance with the order.
The concern driving what looks like an unprecedented penalty from the CMA appears to be both Facebook’s conscious flouting of standard compliance requirements, and the risk of it doing that to conceal what it’s doing with Giphy — in order to carry out activity that could, for example, make it harder for the watchdog to order a full unwinding of the acquisition — which is one of a number of possible remedies it laid out this summer. (And which Facebook quickly denounced in a highly critical public response that also questioned the authority of the CMA to regulate the purchase at all.)
There’s another tidbit here too: The CMA has also issued a separate fine — stinging Facebook a further £500,000 for changing its Chief Compliance Officer on two separate occasions without first seeking consent from the regulator.
Commenting on the action in a statement, Joel Bamford, senior director of mergers at the CMA, said: “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.”
“This should serve as a warning to any company that thinks it is above the law,” he added.
Explaining the IEO requirement Bamford also said: “Initial enforcement orders are a key part of the UK’s voluntary merger control regime. Companies are not required to seek CMA approval before they complete an acquisition but, if they decide to go ahead with a merger, we can stop the companies from integrating further if we think consumers might be affected and an investigation is needed.”
Facebook was contacted for a response to the CMA penalties — and in statement it criticized the action as “unfair”, claiming it had sought to take a “best effort compliance approach”.
“We strongly disagree with the CMA’s unfair decision to punish Facebook for a best effort compliance approach, which the CMA itself ultimately approved. We will review the CMA’s decision and consider our options,” said Facebook’s unnamed spokesperson.
The company also provided some “background” information that it said this was not for direct quoting or for attribution — so we won’t be publishing it.
Instead, here’s a GIF: