Facebook buyout of Giphy raises competition concerns, says UK CMA

LONDON – The UK competition regulator said on Thursday that Facebook’s acquisition of popular GIF website Giphy poses competition concerns.

The Competition and Markets Authority said it had tentatively concluded that Facebook’s purchase of Giphy would hurt competition between social media platforms and eliminate a potential challenger in the display advertising market.

The CMA said it could ask Facebook to unwind the deal, which is said to be worth $ 400 million, and sell Giphy if its competition concerns are ultimately confirmed.

It’s the latest sign that the UK regulator is unhappy with the power wielded by the tech giants of Silicon Valley and a rare example of a foreign regulator seeking to unwind a deal involving two US companies.

Millions of GIFs are shared on social media sites like Twitter, Snapchat, and TikTok, as well as via email and text. Most of the social media platforms rely on access to Giphy’s GIF database, while some also come from Google’s Tenor.

Facebook’s ownership of Giphy could cause it to deny other platforms access to its GIFs, the CMA said.

He added that any reduction in the quality or choice of GIFs could impact how people use social media sites and whether or not they switch to another platform, such as Facebook, which has already a significant market power.

Facebook’s platforms – Facebook, WhatsApp and Instagram – already account for more than 70% of the time people spend on social media, according to CMA’s analysis.

Stuart McIntosh, chairman of the independent investigation group responsible for the latest phase of the investigation, said in a statement that Facebook may pull GIFs from competing platforms or ask users to provide more data to access them.

McIntosh said the deal also removes a “potential challenger” from Facebook in the £ 5.5 billion display advertising market.

“Although our investigation revealed serious competition concerns, these are provisional,” said McIntosh.

“We will now consult on our findings before we complete our review. If we find that the merger is detrimental to the market and social media users, we will take the necessary steps to ensure the protection of individuals. “

Facebook and Giphy are headquartered in the United States, but the CMA can investigate mergers when the acquiree has annual sales of at least £ 70million ($ 88million), or when the combined companies have at least 25% of the shares of any “reasonable” market.

A Facebook spokesperson told CNBC the company disagrees with the CMA preliminary findings.

“As we have demonstrated, this merger is in the best interests of the people and businesses in the UK – and around the world – who use GIPHY and our services,” the spokesperson said. “We will continue to work with the CMA to address the misconception that the deal hurts competition.”

At the time of the acquisition, Facebook said it planned to further integrate Giphy into the Instagram app “so people can find the right way to express themselves.”

Facebook has previously tried to downplay claims that the deal could reduce competition.

“Developers and API partners will continue to have the same access to Giphy, and Giphy’s creative community will still be able to create great content,” a Facebook spokesperson said in May 2020.

“We are ready to show regulators that this acquisition is good for consumers, developers and creators of content.”

The CMA invites interested parties to comment on its preliminary findings before the release of its final report on October 6.