UK watchdog says Facebook's Giphy acquisition may stifle competition

The CMA says the deal may limit market access to a popular service

The logos of both Facebook and Giphy

The UK's competition watchdog has raised concerns over Facebook's planned acquisition of image site Giphy, suggesting the deal could limit access for other social media firms.

The Competition and Markets Authority (CMA) said that the takeover of Giphy will negatively impact the market for digital advertising and as well as restrict other social media firms that use Giphy on their platforms.

The CMA has now given Facebook and Giphy five days to address its concerns.

Prior to the $400 million acquisition, which was first announced in May 2020, Giphy's advertising business competed with Facebook, and the company was also set to expand digital advertising partnerships into other countries, including the UK.

The CMA argued on Thursday that such a deal would mean Giphy would have less of an incentive to expand its digital advertising and suggested it could lead to a loss of competition within the market. For context, the regulator also pointed out that Facebook's digital advertising business makes up more than 50% of the market - which is said to be worth £5.5 billion.

The regulator is also concerned that Facebook could use the acquisition to disrupt rival social media companies either by preventing them from using Giphy or by changing the terms of the service.

"Many people use Gifs when they communicate online so it's important that platforms aren't restricted in what they can offer and people have a range of options to pick from," said Andrea Gomes da Silva, the CMA's executive director of markets and mergers.

"It is vital we ensure that Facebook, as a large and powerful big tech firm, isn't using its strong market position to stifle competition. Should the companies fail to address our concerns, we will launch a more in-depth review to ensure consumers and businesses don't lose out."

A spokesperson for Facebook told IT Pro that it will "continue to fully cooperate" with the CMA's investigation, adding that the merger is in the interests of everyone in the UK who uses both Giphy and Facebook. 

If either firm fail to convince the CMA the deal isn't anti-competitive, the watchdog said it will refer the case to a second investigation.

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