Background
In the course of general market and media monitoring, the Austrian Federal Competition Authority (AFCA) became aware of the merger between the two US-based companies Facebook and GIPHY, which was implemented in May 2020. The AFCA then initiated investigations based on suspicion of a violation of the standstill obligation, as the merger had not been notified in Austria. On 04.06.2021, the AFCA filed an application with the Cartel Court for the imposition of a fine in the amount of EUR 9.6 million for the violation of the standstill obligation in the merger Facebook / GIPHY. This application is based on a settlement agreed upon with Facebook. Facebook fully cooperated with the AFCA and provided extensive documentation as well as waivers of confidentiality regarding the exchange with other authorities.
Violation of the standstill obligation
The investigations of the AFCA have shown that the acquisition of GIPHY by Facebook should have been notified in Austria as it meets the criteria of the value of transaction threshold. This notification threshold was introduced in particular for mergers whose economic or competitive significance is not primarily reflected in the turnover of the companies involved, but is reflected in a high transaction value of at least EUR 200 million.
With regard to the merger between Facebook and GIPHY, the examination of the AFCA focused primarily on the question of GIPHY's significant domestic activities, which is a prerequisite for the value of transaction threshold. The AFCA concluded that GIPHY has significant domestic activities in Austria. Based on the facts of the case, not only the direct use via GIPHY's own website and app must be taken into account, but also users of other services, third-party websites, and apps that integrate GIPHY by using application programming interfaces (e.g. Facebook, Signal, Snapchat).
Results of the investigation
The merger between Facebook and GIPHY was not notified prior to implementation, resulting in a violation of the standstill obligation. Undertakings are required to notify the AFCA in advance of merger projects that meet the notification thresholds and to wait until they have received clearance before implementing them.
The notification requirement intends to give the AFCA the opportunity to examine a merger project from a competition law perspective prior to its implementation. Violation of the standstill obligation constitutes a violation of the Cartel Act, which can be punished with fines up to 10% of the total turnover.
Amicable conclusion of proceedings
In the course of the investigation, Facebook cooperated comprehensively with the AFCA, provided the AFCA with extensive documentation and issued corresponding waivers of confidentiality regarding the exchange with other authorities. Facebook also accepted the allegations made by the AFCA and approached the AFCA with a request for an amicable conclusion of the proceedings ("settlement").
A settlement enables undertakings to conclude proceedings quickly and in a way that efficiently preserves resources. Cooperation can be taken into account by a reduction of fines of up to 20%. The possibility of a settlement exists in all proceedings for violations of the Cartel Act or European competition law.
On the basis of Facebook's acknowledgment, the AFCA filed an application for the imposition of a fine in the amount of EUR 9.6 million to the Cartel Court on 04.06.2021, which is required to decide on the imposition of a fine on the basis of the acknowledged facts. Facebook acknowledged the appropriateness of the fine of EUR 9.6 million requested by the AFCA.
The AFCA is cooperating with other authorities, including the UK CMA, in these proceedings. Nationally, in addition to close coordination with the Federal Cartel Prosecutor, the AFCA cooperated in particular with RTR within the framework of the joint Digital Task Force.
The merger will be notified to the AFCA in the near future, so that a substantive review of the merger can be conducted.