CMA could force Facebook to get rid of Giphy

The regulator is reviewing last year's acquisition and could force Facebook to unwind the $400 million deal

The UK's Competition and Markets Authority is firing another salvo in the ongoing case of regulators versus big tech, announcing its desire for Facebook to divest itself of popular GIF platform, Giphy.

The social media giant bought Giphy last year for $400 million, joining its earlier purchases of Instagram and WhatsApp.

However, the CMA has concluded that 'Facebook's merger with Giphy will harm competition between social media platforms and remove a potential challenger in the display advertising market.'

Regulators around the world are bearing their fangs at big tech firms, especially in the West. The UK and EU revealed new proposals for regulation last year, and the EU followed that with new rules to govern AI in April. Even the notoriously regulation-light USA is in on the action, with President Biden appointing an outspoken critic of big tech to lead the Federal Trade Commission.

Facebook is currently the UK's largest provider of display advertising, with around a 50 per cent market share, and Giphy is the country's most-used GIF platform; its only competitor is Google's Tenor.

Giphy had launched its own display advertising business in the USA before the merger, and was said to be considering rolling it out to the UK, which would have created a challenger to Facebook. Post-merger, Facebook has terminated Giphy's paid advertising partnerships.

The CMA notes that GIFs are used in millions of posts every day. Any reduction in choice or quality of these options on alternate platforms could drive people to Facebook.

Although there has been no indication of Facebook making moves to limit GIF choice, the CMA notes that it is a possibility in the future. Alternatively, it could make the terms of using Giphy more restrictive, such as requiring more user data from competing social media platforms.

Stuart McIntosh, chair of the independent inquiry group carrying out the phase 2 investigation, said:

"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's move is not a common one: it's rare for a regulator to get involved with merger decisions outside its own country. However, if it concludes that its concerns are valid Facebook could be forced to reverse the acquisition.

For its part, Facebook provided a canned response predictably disagreeing with the CMA's conclusions:

'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.'

The company added that Giphy doesn't directly compete with its existing services, with no social media network, display advertising business or 'meaningful audience' of its own.

Stakeholders can now submit their own responses on the CMA's findings by emailing [email protected]. Responses to its notice of possible remedies must be submitted by 25th August, and to the provisional findings by 2nd September. These will be considered before the final report is released in October.