Facebook Fined $70 Million Over Rules Breach in Giphy Deal

(Bloomberg) -- Facebook Inc. was fined 50.5 million pounds ($70 million) by the U.K.’s merger watchdog for failing to update regulators on the deal with Giphy they were probing.

The U.K.’s Competition and Markets Authority said Facebook “consciously” refused to report on efforts to hold separate the Giphy GIF search engine it bought before getting U.K. merger approval.

“As a result, the CMA has issued a fine of 50 million pounds for this major breach, which fundamentally undermined its ability to prevent, monitor and put right any issues,” the authority said Wednesday. “This should serve as a warning to any company that thinks it is above the law.”

The fine shows regulators are determined to clamp down when companies don’t follow merger approval rules, often the only time authorities can rule on companies’ expansion. Austria fined Facebook 9.6 million euros ($11 million) in June for closing the deal without approval.

The CMA also imposed an additional 500,000 pound penalty for changing a chief compliance officer twice without consent. The CMA is due to decide on the deal by Dec. 1 and has already recommended Facebook sell Giphy. Facebook paid $315 million for Giphy, the CMA said in August.

The tech giant strongly disagrees with “the CMA’s unfair decision to punish Facebook for a best effort compliance approach, which the CMA itself ultimately approved,” a company spokesperson said in an email. “We will review the CMA’s decision and consider our options.”

Facebook earlier complained that the CMA’s order on how it should run Giphy last year was so broad that it made it extremely difficult for the social network to run business activities unrelated to Giphy such as hiring managers or starting new services without prior consent from the CMA.

Regulators have faced a barrage of criticism for allowing Silicon Valley to snap up potential rivals before they make it big. Facebook’s game-changing takeover of photo-sharing app Instagram is often cited as a deal that was waved through by regulators without proper scrutiny.

U.K. officials have said they were concerned that this deal could allow Facebook to stifle the supply of Giphy’s library of video clips and animated videos on rival services such as Apple Inc.’s iMessage, Twitter, Signal, TikTok and others.

Closing a deal without approval can be a high-risk strategy. The EU may fine Illumina Inc. as much as $400 million for completing a deal without permission. Google closed its Fitbit takeover earlier this year without getting U.S. or Australian permission. Australia is conducting an enforcement probe into the deal.

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