Just over a year ago, Facebook bought Giphy for more than $ 400 million. However, a new investigation by British regulators could bring a severe headache to the social network. According to the UK Competition and Markets Authority (CMA), the acquisition negatively impacts competition on social media.
Although its considerations are preliminary, the CMA assures that, if confirmed, “it could require Facebook to cancel the deal and sell Giphy in its entirety” . The interesting thing about the British report is that it not only puts the magnifying glass on how Facebook could prevent other social networks from accessing the popular platform of GIF files; It also highlights how the purchase could have served to eliminate a potential rival in the online advertising market.
In the investigation of the British authority there are no half measures. The agency indicates that control over Giphy could serve to increase the already high power that Facebook holds in the market. This would not only be achieved by preventing other social networks from accessing GIFs, but also by conditioning their use on the collection of a greater amount of personal data. This is how they explain it:
The CMA provisionally found that Facebook's ownership of Giphy could lead to it denying other platforms access to its GIFs. Alternatively, you could change the terms of this access; For example, Facebook could require Giphy clients, such as TikTok, Twitter, and Snapchat, to provide more user data to access GIFs. Such actions could increase Facebook's market power, which is already significant. CMA analysis suggests that Facebook platforms (Facebook, WhatsApp and Instagram) account for more than 70% of the time people spend on social media and 80% of all Internet users access them at least once per month.
UK regulators go after Facebook over Giphy purchase
Zuckerberg's GIF on Giphy As we already mentioned, the other point that the CMA puts the magnifying glass on relates to the online advertising business. According to the British entity, before Facebook bought it, Giphy positioned itself as an alternative for companies to show ads on the web.
Specifically, it indicates that in the United States the interference of the platform in the advertising sector was growing; and even mentions Pepsi as one of the big companies that used Giphy to promote their brand through GIFs. The investigation highlights that the platform had plans to expand this service to other countries, including the United Kingdom; however, were truncated when Facebook acquired it :
This would have brought a new player to the advertising market and a potential rival for Facebook. It would also have fostered more innovation from others in the market, including social media sites and advertisers. However, Facebook canceled Giphy's paid advertising partnerships after the deal, meaning a significant source of potential competition has been lost.
To justify its concern, the Competition and Markets Authority says that Facebook already controls 50% of display advertising in the UK .
The response from the social network was immediate
Engadget contacted a Facebook spokesperson, who came to the crossroads of the allegations. From the social network they disagree with the preliminary results of the investigation, and consider that are not supported by the evidence . “We will continue to work with the CMA to address the misconception that the agreement harms competition,” they indicated.
But this is not all, as he also threw darts at the British authorities. According to the spokesperson for the social network, the CMA does not have jurisdiction over the agreement because Giphy does not operate from the United Kingdom. It also indicated that the advertising service of the GIF platform does not qualify as graphic advertising on the screen, according to the definition of the regulatory entity.
Beyond the dispute itself, the Competition and Markets Authority will release the final report on October 6 . Are there any real chances Facebook should divest itself of Giphy? Today is a mystery, but a long dispute is looming to see who gets the last word.
