Facebook may have to unwind Giphy takeover, says UK watchdog

13 Aug 2021

Image: © sharafmaksumov/Stock.adobe.com

The UK’s competition authority said the takeover could negatively impact competition between social media platforms.

Facebook may have to sell Giphy following provisional findings from the UK’s competition authority.

The social media giant announced its acquisition of Giphy, a search engine for GIFs, last year in a deal believed to be worth more than $400m.

However, only a month after the deal was announced, the UK Competition and Markets Authority (CMA) said an investigation was underway to establish if the acquisition would create an uncompetitive market in the social media sector.

Now, following an in-depth investigation, the CMA has provisionally found that Facebook’s ownership of Giphy could lead to other platforms being denied access to its GIFs.

The competition authority also stated that, prior to the merger, Giphy had the potential to compete with Facebook in the display advertising space.

“However, Facebook terminated Giphy’s paid advertising partnerships following the deal, meaning an important source of potential competition has been lost.” the CMA said. “This is particularly concerning given Facebook’s existing market power in display advertising.”

The CMA will now consult with interested parties, including other competition authorities, before its final report on 6 October 2021.

If the watchdog’s provisional concerns are ultimately confirmed, it could force Facebook to unwind the deal and sell off Giphy in its entirety.

A spokesperson for Facebook said the company disagrees with the CMA’s preliminary findings.

“As we have demonstrated, this merger is in the best interest of people and businesses in the UK – and around the world – who use Giphy and our services,” a spokesperson told Siliconrepublic.com.

“We will continue to work with the CMA to address the misconception that the deal harms competition.”

Facebook is no stranger to competition investigations. Earlier this year, the social media giant was hit with two separate competition investigations in the EU and UK. Both investigations are looking into Facebook’s classified ads section and how the tech giant utilises the data it collects.

The company’s planned acquisition of Kustomer, a customer services software start-up, also attracted scrutiny. Earlier this month, the European Commission announced that it has opened an in-depth investigation to assess the deal.

Jenny Darmody is the editor of Silicon Republic