The logos of Facebook and Giphy.
Aytac Unal | Anadolu Agency via Getty Images
LONDON – The UK competition authority announced Thursday that Facebook’s acquisition of popular GIF website Giphy raised competition concerns.
The competition and market regulator said it has tentatively determined that Facebook’s purchase of Giphy will affect competition between social media platforms and eliminate a potential challenger in the display advertising market.
The CMA said it could ask Facebook to break up the deal, which is allegedly worth $ 400 million, and sell Giphy if its competition concerns are ultimately confirmed.
GIFs are shared millions of times on social media sites like Twitter, Snapchat, and TikTok, as well as via email and text messages. Most social media platforms rely on Giphy to access the GIF database, while some also come from Google’s tenor.
Facebook’s ownership of Giphy could result in other platforms being denied access to its GIFs, the CMA said.
It added that any reduction in quality or selection of GIFs could have an impact on how people use social media sites and whether they switch to another platform like Facebook, which already has significant market power.
Facebook’s platforms – Facebook, WhatsApp and Instagram – already account for over 70% of the time people spend on social media, according to CMA analysis.
Stuart McIntosh, chair of the independent research group conducting the latest stage of the investigation, said in a statement that Facebook could pull GIFs from competing platforms or prompt users to hand over more data to access.
McIntosh said the deal also removed a “potential challenger” for Facebook in the £ 5.5 billion display advertising market.
“While our investigation has identified serious competition concerns, these are preliminary,” said McIntosh.
“We will now consult our results before we finalize our review. Should we conclude that the merger is harmful to the market and social media users, we will take the necessary steps to ensure that people are protected. “
Facebook and Giphy are both headquartered in the US, but the CMA can investigate mergers if the acquired company has annual sales of at least £ 70 million ($ 88 million) or if the combined companies have at least 25% stake in a “reasonable” Market.
A Facebook spokesman told CNBC that the company disagreed with the CMA’s preliminary results.
“As we’ve 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,” they said. “We will continue to work with the CMA to clear the misconception that the deal harms competition.”
At the time of the takeover, Facebook announced that it would continue to integrate Giphy into the Instagram app “so that people can find exactly the right way to express themselves.”
Facebook previously tried to downplay claims that the deal could reduce competition.
“Developers and API partners will continue to have equal access to Giphy, and Giphy’s creative community will continue to create great content,” a Facebook spokesperson said in May last year.
“We are ready to show regulators that this acquisition is positive for consumers, developers and content creators alike.”