Facebook shouldn’t be allowed to buy Giphy, says UK regulator

Facebook shouldn’t be allowed to buy Giphy, says UK regulator
Facebook’s deal to buy the GIF search engine Giphy should be unwound due to competition concerns, according to the UK’s Competition and Markets Authority.
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15 months ago, Facebook said it was buying the popular GIF search engine Giphy for about $400 million. Now the acquisition may be a bust, thanks to an antitrust probe by the UK’s Competition and Markets Authority.

In a preliminary findings report published Thursday, the CMA said the deal should be unwound because it will “negatively impact competition between social media platforms.”

The CMA’s reasoning for wanting to block the Giphy deal is as follows:

“Millions of posts every day on social media sites now include a GIF. Any reduction in the choice or quality of these GIFs could significantly affect how people use these sites and whether or not they switch to a different platform, such as Facebook. As most major social media sites that compete with Facebook use Giphy GIFs, and there is only one other large provider of GIFs – Google’s Tenor – these platforms have very little choice.

The CMA provisionally found that Facebook’s ownership of Giphy could lead it to deny other platforms access to its GIFs. Alternatively, it could change the terms of this access – for example, Facebook could require Giphy customers, such as TikTok, Twitter and Snapchat, to provide more user data in order to access Giphy GIFs. Such actions could increase Facebook’s market power, which is already significant.”

Putting aside the logic that someone would switch to using Facebook because of GIFs (I love GIFs as much as the next person, but come on), the CMA argues that Giphy was in the process of building up an ads business that would have competed with Facebook. It claims that Facebook made Giphy end those plans after it announced the deal, thereby reducing competition in the marketplace.

Facebook has refuted this idea in past submissions to the CMA, citing internal documents it and Giphy both submitted to the agency for the probe. In May, Facebook wrote in a filing to the watchdog that Giphy had “no meaningful audience of its own” and was already “reliant on Facebook for a significant proportion of its user traffic.”

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Whether Facebook is allowed to buy Giphy or not, the scrutiny on this deal shows how Facebook’s era of social media-related acquisitions may be over. Its more recent $1 billion acquisition attempt for Kustomer, a customer service platform for businesses, is under antitrust review in multiple countries and could also be blocked. The only types of acquisitions that Facebook has been able to get away with in the last few years are related to its augmented and virtual reality efforts.