The UK’s Competition and Markets Authority warned Facebook it may have to unwind a takeover of graphics creation tool Giphy and sell-off the business, after an in-depth investigation into the merger raised concerns.
In a statement, the CMA explained its probe provisionally found Facebook’s ownership of Giphy could ultimately lead it to deny other platforms access to its Graphic Interchange Format (GIF). It also raised concerns the company could change terms of access by requiring customers including rival social media providers TikTok and Twitter to provide more user data to access its services.
Such actions could increase Facebook’s “already significant” market power.
The CMA noted millions of social media posts now include a GIF and any reduction in choice or quality could significantly affect how people use the sites, including switching to another platform like Facebook.
Advertising dominance
Facebook sealed the Giphy acquisition in May 2020, but was blocked from integrating the assets with subsidiary Instagram due to the CMA’s concerns. The prohibition will only be lifted once the investigation is concluded.
The CMA’s other concerns relate to digital display advertising. It noted Giphy was considering expanding services to other countries, including the UK, before the Facebook tie-up.
This would have brought a new player and potential competitor into the advertising market, the CMA noted. Following the deal, Facebook moved to terminate Giphy’s paid advertising partnerships, “meaning an important source of potential competition has been lost”.
The regulator said this was particularly concerning as Facebook already holds a 50 per cent share of the $5.5 billion display advertising market in the country.
While the concerns were “serious”, the CMA noted they were provisional and it would now consult on its findings before completing the investigation.
If its concerns are confirmed, Facebook could be forced to sell-off the business.
The CMA’s final report is due by 6 October.
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