Facebook might have to sell Giphy GIF distributor again. This is the aim of the British competition authority CMA (Competition and Markets Authority – CMA). She has examined the acquisition in depth and concludes that it jeopardizes competition between social networks. In addition, Facebook got rid of itself with the purchase of an up-and-coming competitor in the advertising and user tracking market.
Before the purchase by Facebook, Giphy had established a new form of advertising in the USA: companies could use Giphy to spread their brands in animated images (GIF). Economically, Giphy is also a web tracking operator. The funny animated GIFs serve as tracking beacons. In May 2020, Facebook announced the purchase of the GIF platform Giphy. At that time, the CMA temporarily prohibited Facebook from taking over Giphy’s business. The two companies still have to work separately there.
As the CMA has since found out, Giphy wanted to expand its advertising offer to other countries, including the UK. That would have brought a new provider to the UK online advertising market that would have jeopardized Facebook’s market share. While Google dominates online advertising for everything to do with search engines, Facebook has a 50 percent market share of British display advertising on the Internet.
Facebook ignores the CMA
This Market power alone has worried the CMA for a long time. Facebook added fuel to those worries by discontinuing Giphy’s promotional offer in the US immediately after the purchase decided in May 2020. Facebook has fought the preliminary prohibition of the merger in court – in vain. In May, the responsible British judge criticized Facebook for not dealing properly with the CMA and for having been inactive afterwards. The group even refused to answer the CMA’s questions.
So it is not surprising that the authority now wants to nail it down. On Thursday she published the results of her investigations. The provisional result: the takeover damages competition between social networks, which could make it necessary to reverse the transaction. After all, as Giphy owner, Facebook could damage its competitors at any time by cutting off access to the animated images.
so the CMA grants everyone the opportunityto comment on the findings and possible remedies. A final report will be published on October 6th. According to the CMA, competition authorities in other countries are also investigating the Giphy takeover. In the past, Facebook has repeatedly bought up and coming competitors, including WhatsApp in 2014 and Instagram in 2012.