Meta Platforms, Inc. v. Competition and Markets Authority  CAT 26
The Competition Appeal Tribunal (“CAT”) has delivered an important judgment on merger control law in the proceedings brought by Meta Platforms, Inc (“Meta”) for judicial review of the decision of the Competition and Markets Authority (“CMA”) on Meta’s acquisition of GIPHY, Inc (“GIPHY”).
Meta is the parent company of Facebook. GIPHY operates a popular online database and search engine for GIFs. Meta’s acquisition of GIPHY for US$315m (plus US$85m of Meta restricted stock units) in May 2020 was the subject of a CMA merger reference, decided in November 2021, concluding that Meta should be required to divest itself of GIPHY. The CMA’s analysis relied on the concept of dynamic competition.
Meta’s grounds of review were both procedural and substantive in nature. Meta succeeded on certain aspects of one ground of review – namely that the CMA was not entitled to make redactions to its Provisional Findings or ultimate Decision. The CMA successfully resisted the remaining grounds, the CAT holding in particular 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 unlawfully delegated functions of the assigned group, and that the scope of the remedies imposed was within the CMA’s powers.
Many aspects of the judgment are of general interest. A detailed analysis of the role of dynamic competition in merger investigations is contained at paragraphs 28-128. Of particular note is that the CAT has set out its own framework for analysing an impairment to dynamic competition (see paragraphs 100-110). When it came to assess the decision made by the CMA against that framework, the CAT concluded that “the evidence and thinking set out in the Decision easily passes the framework we have sought to set out”. The Decision was therefore a rational one, reasonably open to the CMA (paragraph 126).
The judgment includes consideration of the extent to which the CMA group responsible for a particular merger reference may perform its functions through others. The CAT held that, on the true construction of the Enterprise Act 2002, the Carltona principle applies to CMA groups and so this is permissible (see paragraphs 141-144).
Paragraphs 145-159 address the issue of redactions made by the CMA to its Provisional Findings and subsequent Decision. Amongst other things, the CAT found that the CMA was not permitted “to pick and choose which version of the decision it wishes to defend. The decision that is to be defended is the decision that contains all of the decision-maker’s reasons, and the decision-maker is not permitted to contend that parts of its decision should left out of account” (paragraph 148). It also expressed doubts as to whether the CMA had correctly assessed, in this case, the need to disclose confidential information to Meta in order to secure a fair process (paragraph 157(9)), given that no individuals from Meta were included in the confidentiality ring which the CMA put in place at the administrative stage. However, it stressed that confidentiality rings confined only to the external advisers of the interested parties may well be appropriate in particular cases and that the CMA is, in the first instance, the best judge of this (paragraph 159).
The CAT notes that the successful ground of review “prima facie undermines the entirety of the CMA’s decision” but has held over, for subsequent determination, the consequences of the procedural failure on the part of the CMA and, in particular, the question as to whether that failure obliges it to remit the Decision to the CMA for fresh consideration. However, it has ruled that section 31(2A) of the Senior Courts Act 1981 (which provides that the High Court must refuse relief on an application for judicial review if it appears to the court highly likely that the outcome for the applicant would not have been substantially different) does not apply to review proceedings of the present nature brought under section 120 of the Enterprise Act 2002. See paragraphs 167-171.
The judgment is here.
Daniel Jowell QC, Gerard Rothschild and Richard Howell acted for Meta (instructed by Latham & Watkins).
Emma Mockford acted for the CMA (instructed by their in-house legal team). Marie Demetriou QC was also instructed at an earlier stage of the proceedings.
Sarah Love and Sophie Bird acted for Privacy International, which intervened by written submissions (instructed by Hausfeld).