Facebook May Be Forced To Sell GIF-making Platform Giphy To A Third Party
Facebook may be forced to sell GIF-making platform Giphy to a third party
In response to concerns raised by UK regulators, Facebook (FB) may be forced to spin off Giphy and relinquish control of that company's massive library of GIFs — animated images used by millions to express emotions and reactions across the internet.
The antitrust authorities in the United Kingdom warned on Thursday that Facebook's acquisition of Instagram, which was announced last year, could result in less competition in advertising and social media.
The Competition and Markets Authority (CMA) of the United Kingdom stated in a provisional finding that Facebook's control over Giphy could allow the company to deny other social media sites access to Giphy's images if the company wants to. Giphy's services are currently integrated with Twitter, Snapchat, iMessage, and Slack, among other platforms.
Despite intense antitrust scrutiny from governments around the world, the ruling is a setback for Facebook's global ambitions and a potential red flag for other Big Tech companies considering acquisitions in this regulatory environment.
However, while Facebook's acquisition of Giphy — for an estimated $400 million — is far from the most significant transaction the company has ever completed, it could be the company's first high-profile deal to be unwound by government officials since the company began facing questions about its dominant position in digital markets several years ago. Furthermore, it demonstrates how closely officials are watching Facebook's every move on the internet.
In a statement, a Facebook spokesperson stated that the company disagrees with the findings and that there is insufficient evidence to support them.
a spokesperson for Giphy said the merger is in the best interests of individuals and businesses in the United Kingdom, as well as around the world, who use the company's and its products and services. In the meantime, we will continue to collaborate with the CMA in order to debunk the myth that the transaction is anti-competitive."
During the initial announcement of the deal, Facebook stated that it would continue to provide third parties with the same level of access to Giphy's content that it had previously granted them. The CMA, on the other hand, stated that it was investigating the acquisition less than a month after it had been announced.
Giphy had planned to expand its growing advertising business into the United Kingdom before Facebook acquired the company, according to the Competition and Markets Authority (CMA), a move that could have provided a new avenue for UK brands to promote themselves and created a direct competitor to Facebook in the advertising market.
According to the CMA in a blog post, "following the transaction, Facebook terminated Giphy's paid advertising partnerships, removing an important source of potential competition." The only way to address the concerns about Giphy's relationship with Facebook, according to a related agency document, would be for the company to be completely separated.
"A complete divestiture of Giphy would be a comprehensive and effective remedy," according to the regulatory agency. The company says that at the moment, it is not aware of any smaller divestiture package that would be equally effective.
The CMA is currently soliciting public input on its investigation and proposed remedy, and it expects to issue a final decision by Oct. 6, according to its website.
