CMA prevails against Facebook in the Court of Appeal – Ben Lask acts for CMA

Facebook v Competition and Markets Authority [2021] EWCA Civ 701

The Court of Appeal has dismissed an appeal by Facebook concerning the CMA’s use of interim measures in merger investigations.

The CMA is investigating Facebook’s acquisition of GIPHY, a provider of short soundless videos (GIFs) and stickers, which are used on apps such as WhatsApp, Instagram, TikTok and Snapchat. As is standard practice in merger investigations, the CMA imposed an Interim Enforcement Order (IEO) on the parties at the outset of its investigation, prohibiting any further integration of their businesses and imposing various obligations for the purpose of preventing pre-emptive action (i.e. action which might prejudice the investigation or impede the imposition of any remedies at the end of the investigation). Given the need to act quickly to “hold the ring” with completed mergers, the CMA uses a broad template IEO from which it then grants appropriate derogations in response to reasoned requests.

Facebook applied to the Competition Appeal Tribunal for judicial review of the CMA’s refusal to grant a number of derogations that it had sought from the IEO. It complained that the effect of the IEO was to “freeze” hundreds of Facebook’s businesses and more than 50,000 employees worldwide. The Tribunal dismissed the claim, holding that, since Facebook had refused to provide the information requested by the CMA in order to consider its derogation requests, the CMA had been entitled not to grant the derogations sought. Facebook appealed to the Court of Appeal but, in a judgment handed down on 13 May 2021, its appeal was dismissed. The Court held, in summary, that:

1. Facebook’s case was based on the misapprehension that the CMA’s final remedial were limited to requiring the divestiture of GIPHY, whereas in fact they were wider than that.
2. The problem of which Facebook complained had been entirely of Facebook’s own making. Rather than engaging properly with the CMA, it had made its derogation requests and then “sat on its hands”, refusing to answer the CMA’s questions.
3. A consequence of the UK’s prospective merger regime was that the CMA had to act quickly in appropriate cases. Accordingly, it had developed a broad template for IEOs, which were intended to hold the ring whilst it obtained further information, and which Facebook had not specifically challenged. However, the process broke down if addressees of the IEOs refused to cooperate as Facebook had.

The CMA’s investigation of the Facebook / GIPHY merger is ongoing, with a final decision due in September 2021.

Ben Lask represented the CMA in the Court of Appeal. A copy of the judgment is here.