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UK regulator calls for Facebook to unwind $400m Giphy deal

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The UK competition regulator has called for Facebook to sell online image platform Giphy, which it bought for $400m last year, after provisionally finding competition concerns following an in-depth investigation.

The move is a rare example of an overseas regulator trying to unwind a Big Tech deal, as antitrust scrutiny of Silicon Valley’s acquisitions has intensified around the world.

The Competition and Markets Authority on Thursday said it believed Facebook’s tie-up with Giphy would harm competition between social media platforms and remove a potential competitor in the display advertising market.

The CMA’s findings are provisional, but if it concludes that its concerns are valid, Facebook will be forced to unwind the deal.

The CMA said its “initial view [is] that the only effective way to address the competition issues that we have identified is for Facebook to sell Giphy, in its entirety, to a suitable buyer”.

The watchdog in June 2020 opened an investigation into the deal, which joined together the largest provider of social media and digital display advertising in the UK with the biggest provider of animated images known as GIFs. It is due to publish its final report in October.

The CMA on Thursday said Facebook could deny other platforms access to GIFs because of the tie-up. The social media giant could change its terms of access so that platforms such as TikTok, Twitter and Snapchat could be forced to hand over more user data in order to access GIFs, entrenching Facebook’s already significant power, according to the CMA.

The watchdog said the deal could also remove a crucial competitor to Facebook in the UK display advertising market, where it controlled about a 50 per cent share, according to CMA analysis. Giphy previously offered paid advertising in the US, allowing companies such as PepsiCo to promote their brands through its platform, and was considering expanding that service to other countries including the UK before the deal, the CMA said.

Facebook said: “We disagree with the CMA’s preliminary findings, which we do not believe to be supported by the evidence.”

It added: “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.”

Stuart McIntosh, chair of the independent inquiry group carrying out the investigation, said: “Millions of people share GIFs every day with friends, family and colleagues, and this number continues to grow. Giphy’s takeover could see Facebook withdrawing GIFs from competing platforms or requiring more user data in order to access them. It also removes a potential challenger to Facebook in the £5.5bn display advertising market. None of this would be good news for customers.”

Facebook has insisted that Giphy, which has no revenues or staff in the UK, does not compete with its existing services. It says its Instagram subsidiary has committed to continue to allow rival photo and messaging apps to access Giphy’s library.

In its submission to the CMA, Facebook argued that Giphy “has no display advertising product, nor was it developing one” and had no social network or “meaningful audience” of its own. It positioned Giphy as a company that was struggling to survive as a standalone business, while Facebook planned to invest in, and develop, the service.

Tom Smith, competition lawyer at Geradin Partners and former CMA legal director, said: “This is the first time the CMA has moved to unwind a Big Tech acquisition . . . Today’s provisional decision shows once again that the CMA is flexing its muscles post-Brexit, particularly in the tech sector, and is not afraid of challenging global deals between overseas companies.”


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