A UK regulator is currently opposing Facebook’s acquisition of GIF publishing site Giphy over antitrust concerns.
On Thursday, the UK’s Competition and Markets Authority announced it had “provisionally found Facebook’s merger with Giphy will harm competition between social media platforms and remove a potential challenger in the display advertising market.
“If the Competition and Markets Authority’s (CMA) competition concerns are ultimately confirmed, it could require Facebook to unwind the deal and sell off Giphy in its entirety,” the regulator added.
The CMA’s main concern is that the market is dominated by two major GIF providers to social media companies: Giphy and the Google-owned Tenor. As a result, permitting Facebook to acquire Giphy could pave a way for the social network to influence and undermine its competitors.
“Any reduction in the choice or quality of these GIFs could significantly affect how people use these sites and whether or not they switch to a different platform, such as Facebook,” the regulator said. “As most major social media sites that compete with Facebook use Giphy GIFs, and there is only one other large provider of GIFs—Google’s Tenor—these platforms have very little choice.”
For example, the CMA is concerned Facebook could cut off third-party access to GIFs on Giphy. Or it could impose new requirements on using Giphy’s GIFs, which would force rivals such as TikTok, Twitter, and Snapchat to hand over more user data to Facebook.
“Such actions could increase Facebook’s market power, which is already significant. The CMA’s analysis suggests that Facebook’s platforms—Facebook, WhatsApp, and Instagram—account for over 70% of the time people spend on social media and are accessed at least once a month by 80% of all internet users,” the regulator added.
However, Facebook 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. We will continue to work with the CMA to address the misconception that the deal harms competition,” a company spokesperson said.
Facebook has previously said it’s buying Giphy to improve conversations on Instagram and its other apps. At the time, the company also said it had no plans to change the access requirements to source GIFs from Giphy.
“People will still be able to upload GIFs; developers and API partners will continue to have the same access to Giphy’s APIs; and Giphy’s creative community will still be able to create great content,” Facebook’s VP of product, Vishal Shah, said last year.
Nevertheless, the CMA has been probing Facebook’s attempt to acquire Giphy for over the past year. The UK regulator’s other concern is how prior to the deal, Giphy was offering a paid advertising business that could have competed against Facebook’s own ad services.
“The CMA found that, prior to the deal, Giphy was considering expanding its advertising services to other countries, including the UK. This would have brought a new player into the advertising market and a potential challenger to Facebook,” the regulator said.
The CMA is now calling on interested parties to comment on the provisional findings by Sept. 2. “These will be considered ahead of the CMA issuing its final report, which is due by 6 October 2021,” the regulator said.
