CMA could force Facebook to remove Giphy

The UK Competition and Markets Authority fires another salvo into the pending case of: regulators vs big tech, announcing that Facebook would like to get rid of the popular GIF platform Giphy.

The social media giant bought Giphy for $400 million last year, in addition to its previous purchases of Instagram and WhatsApp.

However, the CMA has concluded that “Facebook’s merger with Giphy will hurt competition among social media platforms and remove a potential challenger in the display advertising market.”

Regulators around the world are joining forces with major tech companies, especially in the West. The UK and the EU new proposals unveiled for regulation last year, and the EU followed that with new rules to rule AI in April. Even the notoriously low-regulation US is in on it, with President Biden appointing an outspoken critic of big tech to run the Federal Trade Commission.

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

Giphy had launched its own display advertising company in the US before the merger and would consider rolling it out to the UK, which would have created a challenger for Facebook. Following the merger, Facebook ended Giphy’s paid advertising partnerships.

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

While there’s no evidence that Facebook is taking steps to limit the choice of GIFs, the CMA notes that this 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 research group conducting the Phase 2 study, said:

“While our investigation has revealed serious competition concerns, these are preliminary. We will now review our findings before finalizing our assessment. Should we conclude that the merger will be detrimental to the market and social media users, we will take appropriate action take to make sure people are protected.”

The move by the CMA is not common: it is rare for a regulator to interfere in merger decisions outside its own country. However, if it concludes that its concerns are justified, Facebook could be forced to undo the acquisition.

For its part, Facebook provided a canned response that was predictably inconsistent with the CMA’s conclusions:

“As we have shown, 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 hurts competition.”

The company added that Giphy does not compete directly with its existing services, without its own social media network, display advertising activity or “meaningful audience.”

Stakeholders can now submit their own responses to the findings of the CMA by emailing Responses to the notification of potential remedies must be submitted by August 25, and to the preliminary findings by September 2. These will be considered before the final report is released in October.

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