The British watchdog is due to take a final decision on the merger deal in early October 2021
The UK Competition and Markets Authority (CMA) has found that social media giant Facebook’s previously closed acquisition of Giphy will negatively affect competition between social media platforms.
The British competition watchdog had launched an in-depth phase 2 investigation in April 2021. In the earlier phase 1 probe, the CMA found that there is a case of the merger significantly lessening competition within the UK.
According to the CMA, the merger brings together the social media giant and the largest provider of GIFs.
The CMA’s provisional finding is that Facebook’s ownership of Giphy can lead the social media firm to prevent other platforms from accessing its GIFs.
Alternatively, Facebook can modify the terms of this access, which potentially means that Giphy’s customers such as TikTok, Snapchat, and Twitter have to give more user data in order to access the GIFs, said the CMA.
The watchdog said that if its competition concerns are eventually confirmed, then Facebook will have to unwind the merger and divest 100% of Giphy.
Furthermore, the CMA said that after acquiring the GIFs provider, Facebook scrapped Giphy’s paid advertising partnerships. This has removed a major source of potential competition, said the watchdog.
The CMA found that Facebook’s existing market power in display advertising is nearly half of the £5.5bn display advertising market in the UK.
CMA’s phase 2 investigation independent inquiry group chair Stuart McIntosh 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 £5.5 billion 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.”
Apart from the CMA, the merger is also being looked into by other competition bodies. The CMA said that it has engaged with the agencies to help advance its investigation.
The watchdog is slated to issue a final report on the merger by 6 October 2021. It will seek responses from interested parties to its provisional findings until 2 September 2021.