Facebook’s Acquisition of Giphy Draws Probe from UK Competition Authority

The Facebook’s (NASDAQ: FB) acquisition of Giphy, an American online database and search engine that allows users to search for and share short looping videos with no sound, has drawn an anti-competition concern from the UK’s Competition and Markets Authority (CMA). According to the press release shared by the watchdog, the takeover can “harm competition between social media platforms and remove a potential challenger in the display advertising market.”

Per an earlier Coinspeaker report, Facebook purchased Giphy for $400 million back in May, 2020 with the intention to merge the startup with Instagram.

The acquisition was a strategic one at the time as a broad range of Facebook’s applications source GIFs from Giphy through the latter’s API. At the time, Facebook’s Vishal Shah, who doubles as Instagram’s VP of product said “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.” However, the CMA has a diverging position on this promise.

The UK watchdog said following its broad investigation, that the merger may push Facebook to restrict competitor’s access to the GIFs, thereby giving the social media giant an undue advantage in the £5.5 billion display ad market which it already dominates.

Probable Implication of Facebook’s Giphy Acquisition

According to Stuart McIntosh, Chair of the independent inquiry group carrying out the phase 2 investigation, the claims are still provisional and any confirmation of a threat to the competition will stir the authorities to take action in a bid to protect final consumers.

“Millions of people share GIFs every day with friends, family and colleagues, and this number continues to grow. Giphy’s takeover could see Facebook withdrawing GIFs from competing platforms or requiring more user data in order to access them. It also removes a potential challenger to Facebook in the £5.5 billion display advertising market. None of this would be good news for customers,” 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.”

Facebook has notably maintained that its acquisitions are not targeted at stiffening competitions. Per a CNBC report, a Facebook spokesperson said the Menlo Park, California based firm disagrees with the CMA’s preliminary findings, saying:

“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.”

The CMA is calling for responses from interested parties to wade into the investigation, ahead of its final report, which is due by 6 October 2021.