The UK Competition and Market Authority have ordered Facebook to sell Giphy. The investigation suggests the purchase could hurt social media users and UK advertisers. The verdict came earlier this week. The CMA has determined that – according to the provisional findings of Phase 2 published in August – the acquisition of Giphy will restrict competition between social media platforms. Facebook can already increase its power by limiting or banning access to Giphy GIFs.
According to the regulator, the acquisition has already removed Giphy as a potential competitor in the display advertising market. Facebook discontinued Giphy’s advertising services in 2020, thus removing a significant source of potential competition. The CMA thinks Facebook’s influence is troubling. The social media giant controls almost half of the 7 billion advertising market in the UK.
Regulators are also concerned about Facebook changing the terms of access to GIFs in the future. In particular, by asking competitors to provide more information to the user to use Giphy. After evaluating the alternatives offered by Facebook and consulting with stakeholders, the CMA concluded that this problem could only be resolved when Facebook sold the entire Giphy. According to the regulator, they are trying to protect millions of social media users; Simultaneously promote innovation and competition in digital advertising. Facebook will review the decision and evaluate all options, including appeals. It should be noted that the company has four weeks to appeal.
Giphy and Facebook
Giphy is a popular website that allows users to create and share animated images. It has an extensive library of short video animations, which is very popular among Facebook users. Giphy also offers access to competitors such as Twitter, Snapchat, and TikTok.
In May 2020, Facebook announced plans to integrate Giphy with Instagram. The company says almost half of Giphy’s traffic comes from various Facebook apps, including WhatsApp and Instagram. Consequently, the acquisition will not affect Giphy’s existing transactions with other partners.
The CMA has launched an antitrust inquiry into the seizure of $400 million. There are currently millions of posts daily on social media sites containing GIFs. Decreasing the selection or quality of GIFs can have a significant impact on how people use these sites.
Facebook said it made fundamental mistakes in its CMA findings. According to the company, regulators must carefully weigh everything. Although the company is headquartered in the US, Facebook and Giphy offer services worldwide and must obey local laws. Notably, last month, the CMA fined Facebook 50.5 million for a significant breach of the order, alleging that the company remained separate from Giphy during the investigation.