On 14 June 2022, the Competition Appeal Tribunal (CAT) delivered an important judgment on merger control in the application brought by Meta Platforms, Inc. (Meta) pursuant to s. 120 of the Enterprise Act 2002 for review of the Competition and Markets Authority (CMA)’s decision that Meta should divest itself of GIPHY, Inc (GIPHY), which Meta acquired in May 2020. The Tribunal dismissed the challenge. Global NGO Privacy International, represented by Hausfeld, intervened in the proceedings in support of the Competition Market Authority (CMA).
The CAT’s key findings
Meta applied for review of the CMA’s decision on six grounds, which were both procedural and substantive in nature. The CAT unanimously dismissed all of Meta’s grounds except for part of procedural Ground 4. In particular, the CAT held that the CMA had correctly directed itself in law as to the applicable test for a substantial lessening of dynamic competition, had taken an appropriate approach to market definition and the counterfactual, and had not acted unlawfully in delegating functions in relation to the merger reference, and that the scope of the remedies it imposed was well within the powers and discretion afforded to it by the Enterprise Act.
In relation to Meta’s Ground 4, the CAT found in Meta’s favour, holding that the CMA was not entitled to make redactions and excisions to its provisional findings or final decision and that the CMA’s approach in this case overly favoured confidentiality concerns of third parties. The CAT has held over, for subsequent determination, the consequences of this procedural failure on the part of the CMA, and the question as to whether that failure obliges the CAT to remit the decision to the CMA for fresh consideration.
Significance of the judgment
The judgment is an important endorsement by the CAT of the CMA’s approach to reviewing mergers that may harm innovation, and in particular of the CMA's assessment of the concept of dynamic competition, which the Tribunal suggests is fluid and may require more than one, connected, market to be considered. The CAT has effectively provided a framework for how the assessment of impairments of dynamic competition under the new (2021) Merger Assessment Guidelines should proceed. In this respect, the judgment is likely to set a useful precedent for increased protection of competition and innovation in digital markets going forward.
Privacy International’s intervention
Privacy International intervened in the case, following one of the first successful applications by a campaigning organisation to intervene before the CAT. Privacy International’s intervention contended, amongst other things, that the divestiture remedy ordered by the CMA was proportionate in light of the risk that Meta would further increase its data dominance through the merger and benefit from GIPHY’s data troves to the detriment of rivals. Although the CAT did not directly address concerns related to data exploitation in the judgment, it ruled that the CMA’s decision to impose a divestiture remedy was indeed appropriate based on its substantive findings of a substantial lessening of competition in this case.