Facebook has been hit with a £50.5 million fine by the Competitions and Markets Authority (CMA) after failing to update the regulator over its dealings following the June 2020 acquisition of Giphy. It is yet another intervention in relation to competition concerns about the social media giant, highlighting growing regulatory interest in their actions.
Initial enforcement orders (IEO) are commonly issued at the start of CMA investigation into completed takeovers – they do not signify guilt in and of themselves. But it does put the onus on companies to regularly report over its compliance with competition law.
IEOs are in place to ensure that monopolistic practices are not being undertaken, ensuring the marketplace is not unfairly distorted by such behemothic dominance. With the increased risk to the market with ongoing concentration in the hands of just a few companies in some sectors, regulators have taken a much more ‘hands-on’ approach in recent years.
Facebook already has ownership and operational oversight of Instagram and WhatsApp – as users of those platforms found out during Facebook’s server crash this month. The increasing market concentration of such popular social media platforms brings very real risks of oligopolistic exploitation.
This is not a first time offence. Facebook has been warned previously by the CMA, as well as sanctioned by governments around the world. 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.’
The ruling has consequences for the entire marketplace and beyond, with the punishment ‘a warning to any company that thinks it is above the law.’
Earlier this year PIRC issued a briefing to clients on ESG risks relating to competition and concentration. It’s an area that we think is relatively under-scrutinised, and growing regulatory intervention in a number of markets makes it an issue for investors to keep a close eye on.