UK Regulator Raises Competition Issues On Facebook Acquisition Of Giphy

UK’s competition regulator, the Competition and Markets Authority, said on Thursday that the acquisition by Facebook Inc. (FB) of popular GIF website Giphy raises competition concerns.

The competition regulator said that it has come to the conclusion that the acquisition will have a negative impact on the competition between social media handles. The acquisition will also lead to the elimination of a potential threat in the display advertising market.

The Competition and Markets Authority said that if needed it may ask Facebook to undo the deal and sell off Giphy, if the regulatory body feels that its competition concerns do come true. Facebook had acquired Giphy in a deal worth $400 million.

Almost all the social media platforms like Twitter, Snapchat and TikTok, e-mails and text messages, make use of GIFs from Giphy’s database of GIFS. The regulatory authority also feels that the takeover by Facebook will deny access to GIFs to other social media platforms.

The CMA said, “Any reduction in the quality or choice of GIFs could impact how people use social media sites and whether or not they switch to a different platform, such as Facebook, which already has significant market power.”

This move is the latest in the series of incidents where the regulatory authority is not happy with the sweeping authority of American tech giants. This is also a rare case where a foreign regulator is intervening in a deal between two American companies.

Stuart McIntosh, chair of the independent inquiry group carrying out the latest phase of the investigation, stated that Facebook could pull GIFs from competing platforms or ask users to hand over more data in order to access them.

The main issue, McIntosh said, is that the deal removes from the 5.5 billion pound display ad market a future competitor.

He said, “While our investigation has shown serious competition concerns, these are provisional. We will now consult on our findings before completing our review. Should we conclude that the merger is detrimental to the market and social media users, we will take the necessary actions to make sure people are protected.”

Even though both Facebook and Giphy are Silicon Valley companies, the UK regulatory authority has the power to look into mergers when the business being acquired has an annual turnover of at least 70 million pounds or $88 million, or when the combined businesses have at least 25 percent share in any “reasonable” market.

Commenting on the regulator’s decision, a Facebook spokesperson completely denied the MA’s preliminary findings.

The spokesperson said, “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.”

When the acquisition happened, Facebook revealed plans to further integrate Giphy into the Instagram app “so that people can find just the right way to express themselves.”

The UK regulatory authority has called the interested parties to comment on its preliminary findings ahead of the publication of its final report on October 6.

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