The United Kingdom’s Competition Watchdog has warned Facebook that they could be forced into selling the GIF search engine and Giphy database.
The Competition and Markets Authority issued the ruling following warnings that Facebook’s deal to acquire Giphy for $400 million in May 2020 could harm competition and create a threat to the digital advertising market.
CMA’s provisional decision is expected to be confirmed by October. However, it recommended that Facebook end the Giphy deal. The ruling is a defeat for the largest social network in the world, and it marks a significant step in the global antitrust campaign against Silicon Valley’s tech giants.
Stuart McIntosh (chair of the CMA independent investigation group) said, “Giphy’s takeover could lead to Facebook withholding GIFs on competing platforms or requiring additional user data to access them.” It also removes an opponent to Facebook in the PS5.5billion display advertising market. This would be bad news for customers.
CMA in June announced that it was investigating Facebook’s purchase of Giphy. It was concerned that Giphy could block rival social networks such as Snapchat, TikTok, and Twitter from Giphy’s vast archive of millions of short looping animated that have become a popular form of social media shorthand. Facebook had stated that Giphy would remain available to rival social networks. Still, it said that it intended to incorporate the New York-based startup into its Instagram team at the time of the deal.
U.K. antitrust watchdog raised concerns about Facebook’s dominance in the British digital advertising marketplace. The company claims it controls 50% of the $7.6billion (PS5.5billion) industry. Giphy had been selling advertising to companies like Dunkin’ Donuts or Pepsi. However, these deals were canceled by Facebook after the takeover. This, according to the CMA.
This decision comes as antitrust regulators from the U.K., Europe, America, and the United States take a more rigid stance against takeovers, particularly those involving Silicon Valley’s tech companies. Facebook won a court fight against the FTC in June. The FTC was attempting to end its seizures on Instagram and Whatsapp.
Facebook disagrees with the CMA’s jurisdiction to interfere in the Giphy takeover. This is even though Giphy had no U.K. revenues at the time of its deal. California-based Menlo Park social network, Facebook, stated that Giphy would continue to permit other companies to access Giphy’s GIF database. It also said that Giphy has “no meaningful audience to advertise” and shouldn’t have been classified as a competitor.
“We disagree entirely with the CMA’s preliminary findings. The evidence does not support them. As we have proven, this merger is in people’s and businesses‘ best interests in the U.K. and around the world who use Giphy and our services. In a statement, a Facebook spokesperson stated that they would continue to work closely with the CMA to correct the myth that the deal hurts competition.
