The top UK anti-trust regulator has said that Facebook’s takeover of popular GIF search engine Giphy raises competition concerns and if its concerns are confirmed, it could require Facebook to unwind the deal and sell off Giphy in its entirety.
Facebook said last year that it was acquiring Giphy for nearly $400 million.
The UK’s Competition and Markets Authority (CMA) said in a statement late on Thursday that following an in-depth investigation, it has provisionally found that Facebook’s takeover of Giphy will negatively impact competition between social media platforms.
“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,” the CMA said in a statement.
Such actions could increase Facebook’s market power, which is already significant.
The CMA’s analysis suggests that Facebook’s platforms – Facebook, WhatsApp, and Instagram – account for over 70 percent of the time people spend on social media and are accessed at least once a month by 80 percent of all internet users.
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,” said the CMA.
“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,” it added.
In May, Facebook wrote in a filing to the UK regulator that Giphy had “no meaningful audience of its own” and was already “reliant on Facebook for a significant proportion of its user traffic.”
“We disagree with the CMA’s preliminary findings, which we do not believe to be supported by the evidence,” a Facebook spokesperson told The Verge.
The CMA found that, prior to the deal, Giphy was considering expanding its advertising services to other countries, including the UK.
“This would have brought a new player into the advertising market and a potential challenger to Facebook. It would also have encouraged greater innovation from others in the market, including social media sites and advertisers,” the regulator noted.
Stuart McIntosh, chair of the independent inquiry group at CMA, said that while their 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,” he said.
The CMA will announce its final decision by October 6.