The Competition and Markets Authority (CMA) has provisionally found that Facebook’s merger with Giphy would be harmful to competition between social media platforms.
The merger would see Facebook as the world’s largest social media site giant merge with Giphy, the largest provider of GIFs.
If the competition watchdog finalises its competition concerns, it could force Facebook to retract the deal and sell off Giphy in its entirety.
The watchdog’s investigation found that if there was a reduction in choice or quality of GIFs – which are used in millions of social media posts daily – it could pressure users to switch to a different platform, such as one of Facebook’s platforms.
If Facebook, which owns Instagram and WhatsApp, also owned Giphy, it could lead the social media giant to deny the GIF platform to other social media sites.
Mark Zuckerberg’s social media giant could alternatively change the terms access, requiring Giphy customers, such as TikTok, Twitter and Snapchat, to provide more user data in order to access Giphy GIFs.
The CMA found that these actions post-merger could push Facebook’s market power to swell even larger.
Chair of the independent inquiry group carrying out the second phase of the investigation, Stuart McIntosh, explained: “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.
“While our investigation has shown serious competition concerns, these are provisional. We will now consult on our findings before completing our review.”
McIntosh added that should the competition watchdog conclude that the merger is harmful to the market and social media users, the body will take “the necessary actions to make sure people are protected”.
Facebook disagreed with the CMA’s provisional findings, saying: “We disagree with the CMA’s preliminary findings, which we do not believe to be supported by the evidence.
“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.”