The competition watchdog has given Facebook and Giphy five working days to address concerns their merger could harm the digital advertising market and the supply of Gifs.
The Competition and Markets Authority (CMA) today said Facebook’s planned takeover of the popular gif-maker, worth a reported $400m (£320m), could stifle competition.
Following an initial investigation, the regulator found that Giphy previously competed with Facebook outside the UK in digital advertising through partnerships with brands such as Pepsi and Dunkin’ Donuts, and had planned to expand to other countries, including the UK.
But it warned that the merger could reduce Giphy’s incentive to expand its digital advertising, leading to a loss of competition in the market, in which Facebook already has more than a 50 per cent share.
The CMA also found that the deal could harm rival social media platforms as it could cause Giphy to offer worse terms to Facebook’s rivals or even stop supplying them completely.
Facebook is planning to merge the gif-maker with Instagram.
“Many people use Gifs when they communicate online so it’s important that platforms aren’t restricted in what they can offer and people have a range of options to pick from,” said Andrea Gomes da Silva, CMA executive director of markets and mergers.
“As the UK’s competition authority, it is our responsibility to make sure that markets remain competitive. It is vital we ensure that Facebook, as a large and powerful Big Tech firm, isn’t using its strong market position to stifle competition.”
The companies now have five days to offer legally-binding proposals to address the competition concerns. The CMA then has a further five days to decide whether to accept the proposals or refer the deal for an in-depth phase two investigation.
A Facebook spokesperson said the company would fully cooperate with the CMA’s investigation, adding: “This merger is good for competition and in the interests of everyone in the UK who uses Giphy and our services — from developers to service providers to content creators.”