UK Antitrust Watchdog Investigates Facebook-Giphy Deal

Concerns Persist Regarding the Giphy Acquisition by Facebook

Ongoing anxieties surrounding the unimpeded circulation of GIFs are still attracting the attention of the U.K.’s competition authority.

CMA Launches In-Depth Investigation

Facebook’s acquisition of Giphy, valued at $400 million and finalized last year, is now subject to a detailed examination by the Competition and Markets Authority (CMA). This follows the regulator’s initial assessment, which indicated the purchase could negatively impact competition within the digital advertising sector.

Competition Concerns Highlighted

The CMA has been reviewing the deal since last summer, continuing its scrutiny throughout 2021. Last week, the authority formally articulated its concerns, stating that the completed Facebook-Giphy merger could exacerbate existing competitive pressures in the digital advertising market, where Facebook already holds a dominant position—controlling over 50% of the display advertising market.

Giphy’s Expansion Plans

The regulator discovered evidence suggesting that, prior to the acquisition, Giphy was actively planning to broaden its digital advertising collaborations to additional countries, including the U.K.

Potential Loss of Competition

“Should Giphy and Facebook remain combined, Giphy may have diminished incentives to pursue expansion of its digital advertising capabilities, potentially resulting in a reduction of competitive forces within this market,” the CMA stated recently.

Impact on Social Media Rivals

The CMA also expressed apprehension that a Facebook-owned Giphy could disadvantage competing social media platforms. This could occur if Facebook were to restrict the availability of animated images to rivals or impose unfavorable conditions—such as requiring them to share user data that could then be leveraged to enhance Facebook’s ad targeting and further solidify its market power.

Regulatory Response

On March 25th, the companies were granted a five-day period by the regulator to address these concerns, potentially through legally enforceable commitments designed to alleviate them.

Phase 2 Investigation Initiated

An in-depth “phase 2” investigation could have been avoided had acceptable concessions been offered. However, the CMA’s announcement of the phase 2 referral today indicates that no such concessions were made. The swiftness of this decision—just five working days after the last notification—suggests a lack of proposed remedies.

Company Statements

Requests for comment have been directed to Facebook and the CMA.

A Facebook spokesperson stated: “We will continue to fully cooperate with the CMA’s investigation. This merger is beneficial for competition and serves the interests of all U.K. users of Giphy and our services—including developers, service providers, and content creators.”

Integration on Hold

Although Facebook has finalized the acquisition of Giphy, the CMA’s ongoing investigation is currently preventing the full integration of Giphy into Facebook’s broader operational structure.

Shifting Regulatory Landscape

Considering Facebook’s established dominance in the digital advertising landscape, the urgency for rapid product innovation through acquisitions is less pronounced than in previous years, when the company was actively building its market leadership without significant regulatory oversight.

CMA’s Focus on Digital Advertising

In recent years, the CMA has increased its attention to the digital advertising market. A 2019 report highlighted substantial concerns regarding the power of the adtech duopoly, Google and Facebook. While the final report suggested awaiting government legislation rather than direct intervention, the issue remains a priority.

New Pro-Competition Regulator

The U.K. is currently establishing a pro-competition regulator specifically focused on large technology companies, responding to concerns about “winner-takes-all” dynamics in digital markets. This incoming Digital Market Unit will enforce a “pro-competition” framework for internet platforms, introducing new compliance requirements in the coming years.

Ongoing Scrutiny of Tech Deals

In the meantime, the CMA continues to rigorously examine tech mergers and strategic shifts, including recently initiating a probe into Google’s plans to phase out support for third-party cookies in Chrome, following complaints from other industry stakeholders.

Recent Deal Clearances

In January, the CMA also reviewed Uber’s proposed acquisition of Autocab. However, on Monday, the deal was approved, with the CMA finding only “limited indirect” competition between the two companies and no evidence suggesting Autocab would become a significant direct competitor to Uber.

Safeguards for Taxi Companies

The regulator also assessed the possibility of Autocab and Uber potentially disadvantaging taxi companies that compete with Uber by reducing the quality of booking and dispatch software or by compelling them to share data. However, the phase 1 investigation revealed the existence of alternative, credible software suppliers and referral networks, providing taxi companies with viable alternatives should Uber engage in such practices, ultimately leading to the deal’s approval.