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Facebook may be forced to abandon Giphy acquisition following CMA report

The watchdog said the $400 million takeover will "negatively impact competition between social media platforms"

The logos of both Facebook and Giphy

Facebook’s acquisition of Giphy has been found to have breached competition rules within the social media advertising market.

That's according to the latest findings from the UK’s Competition and Markets Authority (CMA), which launched an investigation into the deal earlier this year.

Facebook purchased the animated image database in May 2020 for an estimated $400 million (£290 million), yet the acquisition quickly raised concerns about its impact on the display advertising market.

The CMA launched a probe into the deal in January 2021, escalating it into an in-depth investigation three months later.

Today, the competition watchdog announced that “Facebook’s takeover of Giphy will negatively impact competition between social media platforms”, with the tech giant potentially requiring its users to provide more personal data in exchange for being able to access the world’s largest GIF library.

Commenting on the findings, Stuart McIntosh, chair of the independent inquiry group carrying out the phase 2 investigation, said that “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," he added. "None of this would be good news for customers. 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."

The CMA is now expected to issue a final report on the acquisition by 6 October 2021.

Facebook told BBC News that it opposes the result of the investigation:

"We disagree with the CMA's preliminary findings, which we do not believe to be supported by the evidence,” said the tech giant.

"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,” it added.

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