Facebook fined $70M for compliance breaches in Giphy probe

The Competition and Markets Authority (CMA) said the penalty, which is more than 150 times higher than the previous record handed down for similar offenses (£325,000), “should serve as a warning to any company that thinks it is above the law,” in a press release Wednesday.

Under U.K. rules, if the CMA decides a merger harms consumers or limits competition, it can launch an investigation to see whether parts of the business should be sold off.

As part of that process, the regulator usually issues an initial enforcement order (IEO), which means the two companies must continue to compete as they would have without the merger.

The order also prevents the companies from integrating further while the investigation is ongoing.

The CMA imposed an IEO on Facebook in June 2020 over concerns the Giphy acquisition would prevent Facebook’s competitors from using animated GIF images on rival social media apps, mobile keyboards, or elsewhere online.

The company allegedly ignored the order—as well as multiple warnings about its noncompliance.

According to the regulator:

• Facebook failed to provide regular updates outlining its compliance with the IEO;
• The company “significantly” limited the scope of those updates, despite repeated warnings, and held back information;
• Facebook failed to cooperate with the CMA or comply with the IEO as part of “what might be regarded as a high-risk strategy”; and
• The company’s “deliberate” noncompliance “fundamentally undermined” the CMA’s ability to prevent, monitor, and put right any issues relating to unfair competition. 

“We warned Facebook that its refusal to provide us with important information was a breach of the IEO but, even after losing its appeal in two separate courts [the Competition Appeal Tribunal and Court of Appeal], Facebook continued to disregard its legal obligations,” said Joel Bamford, senior director of mergers at the CMA.

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.

Separately, the CMA fined Facebook £500,000 (U.S. $690,000) for changing its chief compliance officer on two separate occasions without seeking the regulator’s consent that any replacement was fit for the job, which was a stipulation under the IEO.

In a statement, Facebook said: “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.”