Facebook-Giphy deal being probed by UK competition watchdog

The CMA is concerned about possible 'substantial lessening of competition' due to the acquisition

Facebook-Giphy deal is being investigated by British competition watchdog

Dev Kundaliya
15 June 2020

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The UK Competition and Markets Authority announced last week that it is investigating Facebook's acquisition of Giphy for "potential lessening of competition".

In an online post, the watchdog said that it has sent an enforcement order to Facebook under the Enterprise Act 2002, putting a hold on integration of Giphy with Facebook until the investigation is over.

"The Competition and Markets Authority (CMA) is considering whether it is or may be the case that this transaction has resulted in the creation of a relevant merger situation under the merger provisions of the Enterprise Act 2002 and, if so, whether the creation of that situation may be expected to result in a substantial lessening of competition within any market or markets in the United Kingdom for goods or services," the authority said.

The authority is now inviting comments from any interested party until 3rd July, with no date set for its final decision on the deal.

The CMA's decision to investigate the Facebook-Giphy deal follows a similar move by the Australian regulator announced last week.

It is currently unclear whether the US antitrust authorities will also look into the acquisition deal.

Giphy is a popular website that lets users to make and share animated images, or GIFs. It comes with a large library of short video animations which are highly popular among users of Facebook's apps. These short, repetitive videos are used on social media platforms to express emotions.

Giphy also offers animations to rivals like Snapchat, Twitter and TikTok.

Facebook announced the Giphy acquisition in May, saying it intends to integrate the website with its photo-sharing app, Instagram. The social networking giant also said that nearly 50 per cent of Giphy's traffic comes from various Facebook apps, including Instagram and WhatsApp.

The company also said that the takeover would not impact Giphy's existing deals with other partners.

The deal was reported to be worth $400m.

"We are prepared to show regulators that this acquisition is positive for consumers, developers and content creators alike," Facebook said on Friday, commenting on CMA's decision to investigate the deal.

In a statement, Giphy said that it looks forward to explaining to the CMA that its partnership with Facebook "is a win for our users, partners and content creators".

This is not the first time that a regulatory agency has probed Facebook's takeover of another company. Last year, the Wall Street Journal reported that the US Federal Trade Commission was investigating Facebook's acquisitions of Instagram and WhatsApp.

The news of that probe came the same day as the FTC announced a $5 billion settlement with Facebook over its privacy practices that fuelled the Cambridge Analytica scandal.