The United Kingdom’s competition authority will determine by March 25th if Facebook’s purchase of Giphy presents a genuine possibility of significantly reducing competition, it stated today, as the examination of the deal continues.

According to a notice from the Competition and Markets Authority (CMA), it now possesses enough information regarding Facebook, Inc.’s completed acquisition of Giphy, Inc. (referred to as the Merger) to initiate an investigation to decide whether to escalate the case to a Phase 2 review.

The notice clarifies that the initial investigative period, as defined in section 34ZA(3) of the [Enterprise] Act, will begin on January 29, 2021, the first business day following the notice’s release. Consequently, the deadline for the CMA to announce its decision on whether to refer the Merger for a Phase 2 investigation is set for March 25, 2021.

The Competition and Markets Authority began reviewing Facebook’s $400 million acquisition of the GIF-sharing platform in June 2020.

This investigation has halted Facebook’s progress in combining Giphy with its existing operations – including the integration of products, teams, and collaborative business endeavors – despite the acquisition having already been finalized.

Facebook initially announced its intention to acquire Giphy in May 2020, concurrently revealing plans to incorporate the platform into its Instagram photo and video sharing application.

However, these plans are currently suspended due to ongoing competition oversight in the UK. (Last June, both Facebook and Giphy affirmed their adherence to the CMA’s directive to pause all integration activities.)

This situation highlights the increasing regulatory challenges faced by major technology companies when pursuing growth through acquisitions. Last year, for instance, European regulators thoroughly examined Google’s acquisition of Fitbit – ultimately approving the deal in December. This approval, however, was contingent upon Google providing assurances regarding the use of Fitbit data and ensuring access to APIs for competitors.

In the case of Facebook and Giphy, the UK regulatory body will reach a decision in March regarding whether to launch a more comprehensive Phase 2 investigation (which would later require a final determination).

Alternatively, the CMA may conclude that there is no substantial likelihood of reduced competition resulting from Facebook’s acquisition of Giphy, thereby ending its intervention and allowing continued integration between the two companies.

The regulator also retains the option to forgo a Phase 2 investigation if it deems the market insufficiently important to warrant further scrutiny or if it believes the benefits of the merger to consumers outweigh any potential negative competitive impacts.

Considering the acquired business is a platform for sharing animated reaction GIFs, it is plausible that the CMA may determine a more in-depth investigation is unnecessary. Further clarity will be available in the coming months.

Regardless of the outcome, regulatory concerns surrounding Facebook’s dominance in the social media landscape have already delayed its plans for Giphy by more than six months – and the investigation could potentially extend further, affecting the company’s ability to rapidly implement changes.