An investigation by the UK’s Competition and Markets Authority (CMA) department has found that Facebook’s recent acquisition of GIPHY allegedly breaches the country’s competition law. Should the regulator’s concerns be validated, the social media giant will be required to sell off the animated GIF platform.
To recap, Facebook announced that it had acquired GIPHY in May of last year, with the deal reportedly signed at a valuation of US$400 million (~RM1.76 billion). The social network noted that the animated GIF platform is allowed to maintain its own branding, while also operating under the company’s subsidiary division Instagram.
The deal also resulted in the CMA to launch an investigation in January 2021, which later went further in-depth by April. According to Reuters, the UK watchdog found that GIPHY had initially considered expanding its paid advertising services in the US, UK and other countries prior to its takeover by Facebook. However, it alleges that the social media giant terminated the platform’s ad partnership following the deal.
CMA believes that the move would hurt the display advertising market by removing a potential challenger to Facebook. “Giphy’s takeover could see Facebook withdrawing GIFs from competing platforms or requiring more user data in order to access them,” said CMA inquiry chair Stuart McIntosh in a statement. It’s also worth noting that Facebook also sources animated GIFs from Google-owned Tenor platform on its main social media platform.
Meanwhile, Facebook insists that the acquisition “does not compete with existing services” and argues that GIPHY “has no display advertising product, nor was it developing one.” The company also added that it also continued to allow rival photo and messaging apps to access the platform’s animated GIF library.
“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,” a Facebook spokesperson said. “We will continue to work with the CMA to address the misconception that the deal harms competition.”
The CMA’s final report on the GIPHY deal is due in early October. We would only find out if Facebook is forced to sell off its newly acquired platform by then.